Laca v. United States

FOR THE NORTHERN DISTRICT OF OKLAHOMA

MORIS LACA, individually and as parent )

and next friend of R. LACA and A. LACA, )

minor children; and SUELA TAFANI, )

individually and as parent and next friend )

of R. LACA and A. LACA, minor children, )

)

Plaintiffs, )

)

v. ) Case No. 22-cv-00366-SEH-SH

)

UNITED STATES OF AMERICA ex rel. )

DEPARTMENT OF VETERANS )

AFFAIRS; and SCOTT W. JONES, )

Special Agent for the Department of )

Veterans Affairs, )

)

Defendants. )

OPINION AND ORDER

Before the Court is Plaintiffs’ application to recover fees and costs after partially

prevailing on their motion to remove a confidentiality designation from certain

documents.1 Plaintiffs seek total compensation of $13,345.00. For reasons explained

below, Plaintiffs’ motion is denied.

Background

The Court has recounted the facts of this case numerous times in prior orders. As

relevant here, Plaintiffs filed suit on August 24, 2022, seeking recovery for the criminal

investigation and prosecution of Dr. Moris Laca (“Dr. Laca”), as well as his termination

from the Ernest Childers Veteran’s Center in Tulsa, Oklahoma. (ECF No. 2.) Plaintiffs

named as defendants the United States of America ex rel. Department of Veterans Affairs

(the “Government”) and Scott W. Jones, Special Agent for the Department of Veterans

1 There is no need to continue numbering parties in the caption. This is required only in

“the initiating document.” LCvR 3-1(d).

grand jury that Dr. Laca admitted to stealing a patient’s Tramadol, resulting in the

indictment of Dr. Laca in United States v. Laca, 20-CR-86-JFH (N.D. Okla.). (Id. ¶¶ 19–

20.) After discovery revealed information that Plaintiffs argue was contrary to Jones’

testimony, the criminal charges against Dr. Laca were dismissed with prejudice. (Id.

¶¶ 22–25.) Nevertheless, Dr. Laca was later terminated from his employment. (Id. ¶ 26.)

Plaintiffs assert various claims under the Federal Tort Claims Act and 42 U.S.C. § 1983.

By May 2023, discovery in the case had commenced between the Government and

Plaintiffs.2 (ECF No. 43-1.) The process was contentious. Among numerous discovery

disputes, one revolved around the necessity of a protective order. After considering the

parties’ arguments, the Court entered a case-wide protective order that allowed the

parties to self-designate documents as confidential, with a process for resolving disputes

about such designations. (ECF Nos. 60, 61.) The Government then produced an Office

of Inspector General (“OIG”) report and marked the entirety of its contents and exhibits

as confidential. Plaintiffs disputed this designation and—following the procedures set out

in the protective order (ECF No. 61 ¶ 7)—applied to the Court for a ruling that the material

should not be so designated. (ECF No. 99.)

The Court largely granted Plaintiffs’ motion, finding the OIG report should not be

subject to the full protections of the protective order once certain redactions were made.

(ECF No. 137 at 18–19.) As a result, there are no restrictions on the use of the OIG report

in this litigation. (Id. at 19.) The Court did, however, impose a restriction on the use of

the report outside of litigation in order to protect Defendant Jones. (Id.)

2 Defendant Jones did not appear in the action until November 2, 2023. (ECF No. 50.)

Court’s inherent power. (ECF No. 138.)

Analysis

I. Standard of Review

A. The Protective Order

The protective order entered in this case allows a party to designate material as

“confidential” if the party and its counsel believe “in good faith” that the material

constitutes or discloses confidential information contemplated under Fed. R. Civ. P.

26(c). (ECF No. 61 ¶ 1(b).) The obligation to designate in “good faith” mirrors what some

courts have described as Rule 26’s “implicit duty of good faith.” See Healthtrio, LLC v.

Aetna, Inc., No. 12-CV-03229-REB-MJW, 2014 WL 6886923, at *3 (D. Colo. Dec. 5,

2014) (noting that Rule 26(c) “includes an implicit duty of good faith” and finding the

defendants “acted in bad faith by indiscriminately designating nearly their entire

production of documents as” highly confidential); In re ULLICO Inc. Litig., 237 F.R.D.

314, 317 (D.D.C. 2006) (noting the “designation of documents as ‘confidential’ is governed

by an overarching requirement of good faith”).

Under the protective order, another party may challenge this designation after

attempting to resolve the matter with the opposing party. (ECF No. 61 ¶ 7.) The Court

then treats the designating party as it would any other party seeking a protective order

under Rule 26 and considers whether it should, for good cause, issue an order to protect

a person from annoyance, embarrassment, oppression, or undue burden or expense. Fed.

R. Civ. P. 26(c)(1).

B. Rule 37

Courts have found that Rule 37(a) governs the award of expenses on a motion

challenging the over-designation of documents as confidential. See, e.g., In re ULLICO,

“reasonable expenses, including attorney’s fees, incurred in making this motion”

challenging over-designation); Minter v. Wells Fargo Bank, N.A., No. CIV WMN-07-

3442, 2010 WL 5418910, at *2 (D. Md. Dec. 23, 2010) (awarding “attorney’s fees . . .

pursuant to Rule 37(a)(5)” after granting motion on over-designation).

This approach makes sense. As outlined above, under the form of protective order

used in this case, “[o]nce there is a dispute . . ., the Court then treats the designating party

as it would any other party seeking a protective order in the first instance under Rule 26.”

(ECF No. 137 at 6.) In turn, Rule 26 provides that, after ruling on the motion for protective

order, “Rule 37(a)(5) applies to the award of expenses.” Fed. R. Civ. P. 26(c)(3). Where

the motion is granted in part, as it is here, Rule 37 affords the Court discretion to

“apportion the reasonable expenses for the motion,” unless the movant files before

attempting in good faith to obtain the discovery without court intervention, the

nondisclosure is substantially justified, or other circumstances make an award of

expenses unjust.3 Fed. R. Civ. P. 37(a)(5). “The court enjoys significant discretion under

Rule 37(a)(5)(C) and may even decline to award fees entirely.” Doe 1 v. Taos Mun. Sch.,

No. 1:20-CV-01041-SCY-JHR, 2024 WL 4333692, at *1 (D.N.M. Sept. 27, 2024).

3 There is an argument that expenses are awardable under Rule 37(b)(2) for the

Government’s failure to “obey an order to provide or permit discovery.” (ECF No. 138 at

8 (citing Humphreys v. Regents of Univ. of Cal., No. C-04-03808 SI(EDL), 2006 WL

3020902, at *3 (N.D. Cal. Oct. 23, 2006)).) The undersigned finds, however, that Rule

37(a) is a more appropriate vehicle, considering the language of the at-issue protective

order. See also Lipscher v. LRP Publications, Inc., 266 F.3d 1305, 1322–23 (11th Cir.

2001) (“a Rule 26(c) protective order is not ‘an order to provide or permit discovery,’ and

therefore, such orders do not fall within the scope of Rule 37(b)(2)”). But see Lewis v.

Wal-Mart Stores, Inc., No. 02-CV-0944-CVE-FHM, 2006 WL 1892583, at *3, n.4 (N.D.

Okla. July 10, 2006) (noting the “Tenth Circuit has not directly addressed the question,”

but finding “[s]anctions set forth in Fed. R. Civ. P. 37(b)(2) are available for a violation of

a protective order entered pursuant to Fed. R. Civ. P. 26(c)”).

In addition to Rule 37, Plaintiffs argue the Court may award fees and costs

pursuant to its inherent power. Courts have the inherent power to manage their own

affairs to achieve the orderly and expeditious disposition of cases. Stenson v. Edmonds,

86 F.4th 870, 875–76 (10th Cir. 2023). “This power includes the authority to ‘fashion an

appropriate sanction for conduct which abuses the judicial process.’” Id. at 876 (quoting

Chambers v. NASCO, Inc., 501 U.S. 32, 44–45 (1991)); see also Sun River Energy, Inc. v.

Nelson, 800 F.3d 1219, 1227 (10th Cir. 2015) (a court has inherent authority to impose

sanctions for “abuse of the judicial process, or, in other words, for bad faith conduct in

litigation” (internal quotations omitted)). This applies to “actions taken ‘in bad faith,

vexatiously, wantonly, or for oppressive reasons.’” Sun River, 800 F.3d at 1227

(regarding inherent authority to assess fees against counsel (quoting Chambers, 501 U.S.

at 45–46)).

II. Inherent Sanctions Are Not Warranted

In its underlying order on Plaintiffs’ motion to de-designate, the Court found the

Government’s arguments under the Privacy Act to be ill-founded and strongly

disapproved of its counsel’s actions during pre-motion negotiations. (ECF No. 137 at 9–

13.) Even so, the Government’s actions did not rise to the level of abusing the judicial

process, and the Court finds that inherent sanctions are not appropriate here.

In their brief, Plaintiffs argue the Court previously found the Government was

precluded from arguing that material subject to the Privacy Act was confidential pursuant

to the protective order. (See, e.g., ECF No. 138 at 2 (arguing the Court found “at the

November 17th, 2023 hearing on Plaintiffs’ Motion to Compel, that the Privacy Act did not

apply to discovery documents in this case”), 3 (arguing the Court made an “earlier

determination [that] the Privacy Act did not allow the OIG report to be designated as

Government produced the OIG report. At most, after the Government’s production and

during a hearing on a different matter, the Court indicated an initial belief that the Privacy

Act might not be categorically applicable to the report (ECF No. 117 at 109:23-110:8),

while also noting that the Court could not “make a ruling today as to whether the entirety

of that report is confidential” (id. at 107:8–10) and would not, at that hearing, pre-judge

“a fight over confidentiality” (id. at 109:23–24). The Government was fully entitled to

brief its arguments regarding the Privacy Act, which do not appear to have been brought

in bad faith. As such, sanctions are improper based on the Government’s Privacy Act

arguments.

Plaintiffs also note that many of the exhibits designated as confidential “consist of

publicly filed pleadings,” “transcripts of interviews with Dr. Laca,” and other documents

that did not merit protection. (ECF No. 138 at 2.) The Court has rejected “out of hand”

the Government’s assertions that these documents should be designated as confidential

and has chastised the Government for holding such documents hostage in negotiations.

(ECF No. 137 at 11–13.) However, the Court is not convinced that the Government’s

actions rose to the level of wanton conduct done for the purpose of harassment or delay,

or that its actions were so improper as to be described as judicial abuse. See In re

Homeadvisor, Inc. Litig., No. 16-CV-01849-PAB-KLM, 2023 WL 196414, at *27 (D. Colo.

Jan. 16, 2023) (noting courts have found bad faith when actions taken during litigation

have been for purposes of harassment or delay). The Government had a tenable argument

that the confidentiality designation should apply to the OIG report as a whole, rather than

the individual documents within or attached to the report. Moreover, the Government’s

actions did not prevent Plaintiffs’ ability to review the documents. This is in contrast to a

number of cases where designation was done in such a way that even the parties could not

designating documents as attorneys’ eyes only); Brown v. Tellermate Holdings Ltd., No.

2:11-CV-1122, 2014 WL 2987051, at *14, *24 (S.D. Ohio July 1, 2014) (same), adopted as

modified on other grounds, No. 2:11-CV-1122, 2015 WL 4742686 (S.D. Ohio Aug. 11,

2015); Live Eyewear, Inc. v. Biohacked, Inc., No. CV 19-461-FMO (PLAX), 2019 WL

8955366, at *5 (C.D. Cal. Sept. 19, 2019) (same).

The improperly designated material also did not result in the sort of excessive

hinderance to discovery as a whole that was present in other cases where courts have

found bad faith. See, e.g., Healthtrio, 2014 WL 6886923, at *3 (90% of production

designated attorneys’ eyes only); Brown, 2014 WL 2987051, at *13–14 (over 99% so

designated); In re ULLICO, 237 F.R.D. at 317–18 (99% of production designated

confidential); Minter, 2010 WL 5418910, at *3 (more than 52,000 documents produced

as confidential). Inherent sanctions are, therefore, not appropriate here.

III. The Court Declines to Apportion Expenses under Rule 37

The Court further declines to exercise its discretion and apportion Plaintiffs’

expenses under Rule 37(a). While the Court was disappointed by the Government’s

continuing intransigence in certain areas, the process established by the Protective Order

worked as intended. Moreover, there were other difficult questions raised by the parties’

arguments that resulted in the Court entering a hybrid protection order that was not fully

in either side’s favor. It is when such difficult questions arise that parties should be able

to turn to the Court to resolve their differences. It is appropriate that the parties bear

their own expenses for this exercise.

Conclusion

IT IS THEREFORE ORDERED that Plaintiffs’ Application for Attorney Fees and

Costs (ECF No. 138) is DENIED.

ORDERED this 14th day of November, 2024.

hid hot RATE JUDGE

UNITED STATES DISTRICT COURT