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Sentis Group v. Shell Oil Company: CIVIL PROCEDURE - district court erred not recusing; dismissal sanction vacated; remand to new judge; dissent

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
Case Nos. 07-2308/2573/3162
___________
Sentis Group, Inc.; Coral Group, Inc., *
*
Plaintiffs - Appellants, *
* Appeal from the United States
v. * District Court for the Western
* District of Missouri.
Shell Oil Company; Equilon *
Enterprises, LLC, doing business *
as Shell Oil Products US, *
*
Defendants - Appellees. *
___________
Submitted: February 13, 2008
Filed: March 24, 2009
___________
Before MELLOY, GRUENDER, and SHEPHERD, Circuit Judges.
___________
MELLOY, Circuit Judge.
The district court dismissed Plaintiffs claims with prejudice as a sanction for
discovery abuses and other abuses of the judicial process. The district court relied, in
part, on Rule 37 of the Federal Rules of Civil Procedure and on a finding that
Plaintiffs had willfully and prejudicially violated several discovery orders. The
district court also cited its own inherent authority to police the conduct of the parties
before the court and identified numerous instances of behavior that it deemed abusive
but that were unrelated to the courts discovery orders. After the district court
announced its intention to dismiss Plaintiffs case with prejudice, but before it entered
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a written dismissal order, Plaintiffs filed a motion asking the district court to recuse
itself. The district court denied that motion. Plaintiffs appeal as to the sanction and
the recusal issues. We reverse as to the recusal issue, vacate the order of dismissal,
and remand for reassignment and reconsideration of the motion for sanctions.
I. Background
The parties in this case provoked the district court into making untempered
comments, using profane language, and taking actions that created an appearance of
partiality. Reversal is warranted because the sanction of dismissal rested upon the
cumulative findings of several alleged abuses, one of which was clearly erroneous,
and several of which involved the courts resolution of close questions. We do not
believe any of the alleged abuses, standing alone, necessarily justified the sanction of
dismissal. Further, given the severity of the sanction, we do not believe it is
appropriate to apply a harmless-error analysis after removing from consideration one
or more of the several bases offered as cumulative support for the sanction. Finally,
given the appearance of partiality, it is necessary on remand to revisit the close
questions that drove the sanctions decision.
Having reviewed this matter thoroughly, we are neither unsympathetic toward
the district court nor blind to the course of conduct that triggered the courts
frustration. We emphasize that our decision rests on the appearance of partiality, not
a finding of partiality. We make no comment as to the range of possible remedies
available on remand other than to note that neither party behaved in a manner
consistent with the spirit of cooperation, openness, and candor owed to fellow litigants
and the court and called for in modern discovery. We do not intend to suggest
through this opinion that we condone Plaintiffs behavior or tactics. Also, it seems
clear that at some point in the proceedings, Defendants goal shifted from conducting
effective discovery to fanning the flames of the courts frustration and building a case
for sanctions. As such, we encourage the court on remand to carefully consider the
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actions of all parties, paying particular attention to the question of prejudice in
determining what, if any, sanction is appropriate.
a. General Background
Plaintiffs are two corporations engaged in the business of operating Shell-brand
gasoline stations and convenience stores under contracts with Defendants. The parties
refer to the contracts as Multi-Site Operator Agreements (the Agreements). The
Agreements impose an obligation on Defendants to make expense payments to
Plaintiffs to reimburse Plaintiffs for certain costs of maintaining retail gasoline
operations. Plaintiffs underlying allegations, broadly drawn, are that Defendants
induced Plaintiffs to enter into the Agreements and calculated subsequent payments
employing misrepresentations and fraud. Specifically, Plaintiffs allege that
Defendants induced them to enter into the Agreements by providing false historic
expense and profit figures and that Defendants calculated the expense payments using
a method different from what they had represented at the time of contracting.
Plaintiffs assert state-law claims including claims of fraud and breach of contract and
a federal claim under the Petroleum Marketing Practices Act, 15 U.S.C. 2801-41.
Plaintiffs seek over million in damages.
Discovery in this matter was protracted and contentious. Defendants sought
financial information from Plaintiffs as relevant to the underlying question of liability
and as relevant to the scope and cause of Plaintiffs alleged damages. We address in
detail the discovery disputes and the parties actions throughout discovery and leading
up to dismissal of this case. For clarity, however, it first is necessary to introduce and
explain the roles of the people involved in the case.
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b. Key Personnel
Alan Barazi is Plaintiffs owner and principal officer. He communicated with
Defendants employees or officers by various methods, including via email, when the
parties were negotiating the Agreements. In addition, before this litigation
commenced, he taped three conversations between himself and Defendants officers.
His emails and the secretly recorded tapes are at the center of two of five issues that
led to dismissal of the case.
Chris Walls is a business consultant Plaintiffs characterize as a member of
management. Plaintiffs designated Walls as an expert on the topic of the Agreements
and site operations. Prior to this litigation, Walls assisted Plaintiffs in negotiating and
evaluating the merits of the Agreements, and he subsequently assisted in the
management and operation of the stations and in the ongoing analysis of financial
performance at the stations. Although Plaintiffs now characterize Walls as an
employee and insist he is a non-retained expert, Walls submitted bills to Plaintiffs on
an hourly basis for his work on letterhead from his own consulting firm, TQM
Consulting. At the start of litigation, Wallss resume listed TQM as his employer, but
he changed that designation in the course of litigation and eventually listed Plaintiffs
as his employers.
Defendants assert Plaintiffs continually shifted their characterization of Wallss
status back and forth between that of consultant and/or employee. Defendants assert
it was Plaintiffs goal to protect certain information Plaintiffs had shared with Walls
as privileged while at the same time characterizing Walls as an outside consultant so
that he could view information Defendants argue was subject to a protective order.
Production related to Walls appears to have been the primary issue that frustrated the
court and led to dismissal of the case. Four of the five discovery orders involved
production related to Walls.
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Nick Anton is an accountant who served as Plaintiffs employee at the time
Plaintiffs entered into the Agreements. Plaintiffs assert that Antons employment
ceased in late 2004 or early 2005 and that he has served as an outside accounting
consultant since that time. Defendants point out, however, that Barazi and Anton
signed state liquor-license applications after 2005 and that the state liquor-license
applications name Anton as a manager, managing officer, or managing agent.
Defendants argue that Plaintiffs and Barazi lied to the court and to Defendants
about Antons status in order to prevent Defendants from gaining access to
information held by Anton. Two of the five issues that led to the sanction of dismissal
involved Anton. One was related to purported misrepresentations about Antons
status and Plaintiffs failure to comply with an order to make Anton appear at a court
hearing. The other was related to a triple-hearsay report of an alleged attempt to pay
Anton to withhold information.
c. Perceived Abuses that Served as the Basis for Dismissal
i. Documents and Discovery Orders Related to Chris Walls
Plaintiffs filed the present action in July 2005. In their Rule 26(a)(1)
disclosures, they designated Walls as a person with knowledge of their claims. In
early 2006, Plaintiffs produced a privilege log to Defendants referring to fifty-eight
purportedly privileged documents Walls reviewed and/or generated. Defendants
subpoenaed Walls, and in April 2006, Plaintiffs objected, claiming Walls was
Plaintiffs employee and expert. Plaintiffs then failed to produce Walls for a fact
deposition. Defendants moved to compel separate depositions of Walls as a fact
witness and as an expert witness, and the district court granted the motion.
Notwithstanding the district courts grant of this motion, Defendants failed to exercise
their authority to take an expert-witness deposition of Walls.
-6-
Wallss fact-witness deposition took place in May 2006. In the deposition,
Walls stated that all services he provided to Plaintiffs were through his own consulting
firm, TQM; TQM billed Plaintiffs for Walls services on TQM letterhead; and TQM
received 0 per hour from Plaintiffs for Walls services. Walls never received a W2
form from Plaintiffs. Nevertheless, Walls stated that he considered himself Plaintiffs
employee. Defendants agree that, since 2005, Walls has spent 98 percent of his time
assisting Plaintiffs with their claims that the MSO Model was flawed and that Shell
was not properly calculating rent and expense payments. Counsel for Defendants,
in fact, characterize Walls as an important fact witness in this case, and hes a
management member of the plaintiff organization who probably is appearing to be one
of the central figures.
In the course of the fact-witness deposition, Walls referred to one specific
document that he created and used in a presentation to Plaintiffs former counsel. The
document was an attempt by Walls to describe Plaintiffs claims and arguments for
the purpose of litigation. Defendants subsequently demanded production of this one
document. Plaintiffs refused, and Defendants sought an order from the district court
directing Plaintiffs to disclose this one document. The district court entered a first
discovery order on June 16, 2006, that stated, as relevant for the purpose of this
appeal, For each of Plaintiffs experts, Plaintiffs are ordered to produce the
information considered by and/or relied upon in forming that experts opinion.
Plaintiffs continued to refuse to disclose the document, claiming that it was a
document generated by Walls rather than a document considered or relied upon by
Walls in forming his opinion.
Defendants again sought an order from the district court, and on July 13, 2006,
the court entered a second discovery order that stated, Plaintiffs are ordered to
produce any reports or analysis produced [created] by Chris Walls from February 5,
2005, as referred to by Chris Walls in his deposition. Plaintiffs continued to refuse
to give the document to Defendants because, according to Plaintiffs, Walls had created
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the document at issue prior to February 5, 2005. In addition, Plaintiffs asserted the
document was protected by attorneyclient privilege, and they claimed the district
court had not addressed Plaintiffs claims of privilege. Defendants do not seriously
dispute this assertion as they admit the district court, at most, had only implicitly ruled
against privilege prior to August 2006.
Defendants again sought an order from the district court, and on August 17,
2006, the court entered a third discovery order, stating, Plaintiffs are ordered to
produce the document created by Mr. Walls currently being withheld on grounds of
privilege. This Court finds that any privilege was destroyed due to Mr. Walls
reliance on said document. Plaintiffs claim that in late August 2006, they produced
the one document described in the third discovery order. Defendants claim Plaintiffs
did not produce the document, but rather, produced a different document.
Defendants subsequently asked Plaintiffs for all fifty-eight documents from the
privilege log. Plaintiffs refused, and on September 7, 2006, Defendants emailed a
letter to the court asking the court to order Plaintiffs to produce all fifty-eight of the
documents. The following day, the court issued an order that stated, in part:
Plaintiffs are ordered to produce any and all document or analysis
developed by Chris Walls relating to this litigation, regardless of whether
the document is claimed as privileged or if Chris Walls relied upon said
document. The documents must be produced by noon on Monday
September 11, 2007 [sic]. If this documents are not produced, Plaintiffs
will not be permitted to present the testimony of Mr. Walls at trial.
On its face, this fourth discovery order was broader in scope than the preceding
orders. On September 11, Plaintiffs petitioned our court for a Writ of Mandamus
seeking to avoid production under a claim of privilege. In a responsive filing,
Defendants clarified that they sought merely data or other information considered by
Chris Walls in forming his opinions. We denied the petition on September 26, 2006.
1This is one area where we are very sympathetic to the district court. It was
extremely confusing and frustrating to the court to have Plaintiffs change Bates-label
numbers on documents mid-litigation. Whether this was done in a deliberate attempt
to sow further confusion or for more benign purposes will be left to the district court
on remand.
-8-
Shortly thereafter, Plaintiffs produced to the district court for in camera review
documents they considered to be privileged documents related to Chris Walls without
limitation to whether the documents were related to Wallss expert opinion. They also
produced a different, more limited body of documents directly to Defendants.
Plaintiffs filed a motion for in camera review, and Defendants filed a motion
for sanctions. Defendants alleged in their motion that the documents Plaintiffs
produced directly to Defendants did not contain the fifty-eight documents from the
March 2006 privilege log and that the documents contained Bates labels different
from those referenced on the March 2006 privilege log.
The court did not rule on the motion for in camera review. Rather, it scheduled
a hearing for December 15, 2006, to address the motion for in camera review and the
issue of sanctions. We discuss the December 15, 2006 hearing below. After the
hearing, but before the court entered its written order of dismissal, Plaintiffs provided
a table that cross-referenced the new and old Bates labels.1
ii. Nick Anton
A second discovery issue the court addressed at the sanctions hearing and in the
courts order of dismissal involved the production of accounting information by Nick
Anton and Plaintiffs characterization of Anton as an outside consultant.
2The district court and dissent rely upon the failure of Anton to appear at the
July 6 hearing as support for the dismissal. However, neither the district court nor the
dissent discuss the assertion by counsel (apparently accepted by the district court at
the time of the hearing) that counsel was unable to contact Anton during the short time
frame between June 30 and July 6.
-9-
Plaintiffs assert that Anton was their employee when Plaintiffs began operations
under the Agreements and remained an employee through late 2004 or early 2005.
Plaintiffs assert, however, that Anton has been working for Plaintiffs as an outside
consultant since early 2005. It appears that Plaintiffs have been consistent in this
characterization of Antons status to Defendants and to the district court. Barazi and
Anton, however, submitted multiple liquor-license applications in Missouri during the
pendency of this litigation, and they represented on the applications that Anton was
Plaintiffs manager, managing agent, or officer.
Defendants sought financial reports and tax returns held by Anton during
Plaintiffs initial production of documents. By mid 2006, it was not clear that
Defendants had received all of the accounting information they requested. In
particular, Defendants had not received a payroll journal they believed to be
important to their case. Further, Defendants had received some information as raw
data that was meaningless unless opened with the same computer program used by
Plaintiffs. Defendants deposed Anton in May 2006, and at that time, Anton claimed
that he did not maintain a payroll journal. Defendants then asked the court for
assistance.
On June 30, 2006, the court ordered Anton, Barazi, and one of Plaintiffs
employees to appear in court on July 6, 2006, for an evidentiary hearing. Barazi and
the employee appeared, but Anton did not.2 Plaintiffs counsel represented to the
court that Anton was on vacation over the Fourth of July and could not be reached
despite Plaintiffs repeated attempts. In response to this assertion, the district court
stated, [a]ll right, thats fine. At that hearing, Plaintiffs attorney represented to the
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court that Anton was an outside consultant and not an employee. Although Barazi
was present, he did not testify as to Antons status.
In mid-August, the court ordered that Plaintiffs make Anton and his computer
available for another deposition. Defendants deposed Anton a second time on
September 13, 2006, and Anton complied with the order, bringing his computer to the
deposition. After asking a few questions, Defendants discovered that Antons
computer did, in fact, contain a file named payroll journal. Defendants terminated
the deposition, reserving the right to question Anton further in the future, if deemed
necessary.
iii. Alleged Attempt to Pay Anton to Conceal Documents
A third issue cited by the district court in its order of dismissal was a hearsay
report of an alleged attempt by someone to bribe Anton to conceal information.
One of Defendants attorneys, Ms. Badger, submitted a written affidavit to the
district court in which she stated that she had received a phone call from a person she
did not know who claimed to be an attorney from Houston and personal counsel for
Anton. According to Ms. Badger, the person who represented himself as Antons
personal counsel from Houston alleged that Plaintiffs had offered to pay Anton to
conceal data favorable to Defendants. Ms. Badger asserted that the man on the phone
sought compensation from her for documents in Antons possession. The affidavit did
not allege that the man on the phone identified specifically who had made an offer to
Anton.
The district court expressly found in its order of dismissal that Defendants
attorney, Ms. Badger, was credible due to [her] almost twenty-years of respected
practice in front of this Court. The district court relied on the affidavit and the
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credibility assessment of Ms. Badger in finding that Plaintiffs had abused the
discovery process.
iv. Production of Surreptitiously Taped Conversations
A fourth issue cited by the court in its order of dismissal involved tape
recordings Barazi made of three conversations with Defendants employees.
In their initial production of discovery materials, Plaintiffs provided recordings
Barazi had made of two pre-litigation conversations between Barazi and Defendants
officers. Defendants deposed Barazi on August 17, 2006, at which time Defendants
asked Barazi about recorded conversations. Barazi answered in the affirmative when
asked if he had recorded a conversation with one of Defendants officers and if he
had recorded conversations with a second officer. In November 2006, Plaintiffs
attached a tape of the third conversation to a motion.
In support of their motion for sanctions, Defendants asserted that Barazi lied by
testifying in his deposition that he had recorded only two conversations with
Defendants.
v. Production of Emails
A fifth issue the district court cited as a basis for its dismissal order involved
a particular email and attached document that Barazi sent to one of Defendants
employees. During discovery, it became apparent that the parties were disputing
when and whether Plaintiffs or Defendants had inserted certain language or numbers
in the draft Agreement. The email and attachment were relevant to answering this
question. Defendants claimed that they possessed multiple copies of the emailed
document containing subsequent edits and changes but that their employee had not
retained a copy of the original document as sent from Barazi. Similarly, Plaintiffs
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claimed to possess multiple subsequent copies, but no copy of the original document
as sent to Defendants employee.
Defendants sought the original email from Barazi in discovery. Barazi claimed
to have sent the email from a public computer using a Yahoo! account that did not
retain files long enough to cover the dates in question. Barazi could not remember the
exact location of the public computer. Counsel for Plaintiffs indicated Barazi may
have sent the email from an unidentified internet caf in Chicago, but Barazi failed to
confirm this assertion. Defendants urged the court to disbelieve Barazi.
d. The Order of Dismissal and Denial of the Motion to Recuse
At the December 15, 2006 hearing, Plaintiffs made a presentation as to the
motion for in camera review. Defendants then made an hour-long PowerPoint
presentation addressing the discovery orders related to Walls, the alleged abuses
surrounding the email and tape production, Nick Anton, and the alleged attempt to pay
Anton to conceal documents. In Defendants presentation, Defendants repeatedly
referred to the district courts four discovery orders involving Walls as though they
were identical in scope and had all called for the production of a body of documents
labeled the Walls documents. At the end of Defendants presentation, the following
exchange took place:
THE COURT: Well, I want to know something right up front: Have you
produced the 58 documents that were the original request thats
generated the trip to the Eighth Circuit, have you produced them?
MR. STARRETT [Plaintiffs counsel]: To them?
THE COURT: Well, hell, yes. Why would you ask a question like that?
Hell, yes, to the defendant.
MR. STARRETT: The answer excuse me, Your Honor. Im sorry.
-13-
THE COURT: Yes. Did you? Have you?
MR. STARRETT: Those have not all been produced to them because
they are not all expert documents. There are other documents
THE COURT: You didnt hear enough with four phone conferences, and
Im sorry you missed one, with three, four, I kept telling you to produce
stuff, expert stuff. You ducked. You wove. You did everything to keep
from producing them. You go to the Eighth Circuit. They tell you to
produce them, and you still goddamn dont produce them. Now what the
hell do you not understand? You must produce them. Jesus Christ, I
dont want any more ducking and weaving from you on those 58
documents. Thats unbelievable. That gives credence to everything I
just heard from the defense. Now, tell me why else you dont think that
I ought to dismiss this case because of Mr. Walls ducking and weaving,
and Anton, at the direction of Mr. Barazi. You better tell me. Im about
ready to throw this thing out. When you tell me that you still havent
produced those goddamn 58 documents after four times, four times Ive
ordered you to produce them. You are abusing this Court in a bad way.
Now tell me.
MR. STARRETT: Well, may I start with the fact
THE COURT: Yes.
MR. STARRETT: that you have not ruled four times to give them
those 58 documents
THE COURT: Thats it. Im done. Im granting the defendants motion
to dismiss this case for systematic abuse of the discovery process. Mr.
Harris, I direct you to prepare a proposed order with everything youve
just put on that presentation. Ill refine it and slick it up. Mr. Barazi has
abused this court, has misled you, has lied on his deposition. Its
obvious hes lying about that e-mail. This case is gone. Im dismissing
it. What a disgrace to the legal system in the Western District of
Missouri. Prepare the proposed order. Were done. We are done, done,
done. What a disgrace. Its not your fault, its your client. Hes
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coached, hes ducked, and hes hid documents. Were done. Be in
recess.
Shortly after the hearing, Defendants tendered a proposed order, and Plaintiffs
filed suggestions in opposition to the proposed order. On June 1, 2007, Plaintiffs filed
a motion to recuse, and on June 4, 2007, in apparent anticipation of a 150-day
deadline as set forth in Federal Rule of Civil Procedure 58(c)(2)(B), Plaintiffs filed
a notice of appeal. On June 14, 2007, the district court entered its written order of
dismissal with prejudice and the clerk entered judgment. On June 29, Plaintiffs again
filed a notice of appeal, and on August 17, 2007, the district court entered an order
denying Plaintiffs motion for recusal. Plaintiffs filed a timely notice of appeal
following the district courts entry of that order.
Currently pending before the district court is a motion by Defendants claiming
over million in attorney fees and costs. The district court has suspended action on
that motion pending our resolution of these combined appeals. Currently pending in
our court are the appeals from the district courts June 14 and August 17 orders.
In its June 14 order of dismissal, the district court recited several of Plaintiffs
representations regarding Wallss status and chronicled the discovery orders and
Plaintiffs responses to those orders. In particular, the district court found that
Plaintiffs had represented to the court in a May 9, 2006 filing that Walls was a
retained expert and had relied on retained-expert provisions of a protective order to
secure Wallss access to Defendants protected materials. The court also found that
Plaintiffs subsequently characterized Walls as an employee, claiming certain materials
were subject to attorneyclient privilege. Ultimately, the district court concluded that
Plaintiffs had lied to the court regarding Wallss status. The court also stated, This
Court issued four orders compelling the production of the Chris Walls documents.
Plaintiffs have failed to produce all fifty-eight Chris Walls documents. The court
proceeded to note that the documents Plaintiffs produced to Defendants following our
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denial of mandamus relief were not the same as the fifty-eight documents on the
privilege log.
Regarding the tapes, the court found that Barazi had lied by claiming to have
taped only two conversations with Shell officers. Regarding the emails, the court
noted that, Plaintiffs have never produced a critical email and attachment in this
litigation, which is an August 7, 2003 email . . . . Regarding Nick Anton, the district
court found that Antons absence from the July 6, 2006 hearing was a violation of a
discovery order notwithstanding its earlier, apparent lack of concern with Antons
absence. The district court also relied upon the purported offer to pay Anton to
withhold documents as evidence of Plaintiffs willfulness and bad faith. The court
stated:
Plaintiffs also violated the Courts June 20, 3006 Order requiring the
production of Nick Anton at the July 6, 2006 hearing. Mr. Barazi sat in
the courtroom passively listening while his counsel misrepresented Mr.
Antons employment status and their ability to produce Mr. Anton to this
Court.
The evidence as to Mr. Barazis offer to pay Mr. Anton to withhold
unfavorable documents from discovery leads the Court to believe that
the above violations are just the tip of the iceberg Chrysler, 186 F.3d
at 1020-1022. Plaintiffs clearly made every effort to avoid compliance
with the orders of this Court and the rules of discovery.
II. Discussion
a. Dismissal Sanction
We review the district courts imposition of discovery sanctions for abuse of
discretion. Intl Bhd. of Elec. Workers, Local Union No. 545 v. Hope Elec., 380
F.3d 1084, 1105 (8th Cir. 2004). We note, however, that the district courts
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discretion narrows as the severity of the sanction or remedy it elects increases.
Wegener v. Johnson, 527 F.3d 687, 692 (8th Cir. 2008). The sanction of dismissal is
among the harshest of sanctions, and [t]here is a strong policy favoring a trial on the
merits and against depriving a party of his day in court. Fox v. Studebaker-
Worthington, Inc., 516 F.2d 989, 99596 (8th Cir. 1975). Accordingly, [a]lthough
we review the district courts discovery decisions for an abuse of discretion, we more
closely scrutinize dismissal imposed as a discovery sanction because the opportunity
to be heard is a litigants most precious right and should sparingly be denied.
Schoffstall v. Henderson, 223 F.3d 818, 823 (8th Cir. 2000) (quoting Chrysler Corp.
v. Carey, 186 F.3d 1016, 1020 (8th Cir. 1999)). To the extent a discovery sanction
depends upon an interpretation of law, our review of the underlying legal
determination is de novo. United States v. Gonzalez-Lopez, 403 F.3d 558, 564 (8th
Cir 2005) ([A] district court by definition abuses its discretion when it makes an error
of law. (internal quotation and citation omitted)).
When a dismissal sanction rests upon purported violations of discovery orders,
courts should ensure that the specific requirements of Federal Rule of Civil Procedure
37 are met. Societe Internationale Pour Participations Industrielles Et Commerciales,
S.A. v. Rogers, 357 U.S. 197, 207 (1958) (reversing a sanction of dismissal for failure
to satisfy the requirements of Rule 37). To justify a sanction of dismissal, Rule 37
requires: (1) an order compelling discovery, (2) a willful violation of that order, and
(3) prejudice to the other party. Schoffstall, 223 F.3d at 823. Further, as per Societe
Internationale, a Rule 37 analysis normally should stand alone and not blend together
with a less-structured, inherent-authority analysis. There, the Court stated:
In our opinion, whether a court has power to dismiss a complaint
because of noncompliance with a production order depends exclusively
upon Rule 37, which addresses itself with particularity to the
consequences of a failure to make discovery by listing a variety of
remedies which a court may employ as well as by authorizing any order
which is just. There is no need to resort to Rule 41(b), which appears
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in that part of the Rules concerned with trials and which lacks such
specific references to discovery. Further, that Rule is on its face
appropriate only as a defendants remedy, while Rule 37 provides more
expansive coverage by comprehending disobedience of production
orders by any party. Reliance upon Rule 41, which cannot easily be
interpreted to afford a court more expansive powers than does Rule 37,
or upon inherent power, can only obscure analysis of the problem
before us.
Societe Internationale, 357 U.S. at 207 (emphasis added).
Our court has not treated this guidance from Societe Internationale as creating
an absolute rule demanding strict segregation of inherent authority and Rule 37
analyses. Rather, we have affirmed the imposition of a sanction of dismissal in a case
where a district court blended a Rule 37 analysis with an inherent-authority analysis.
See Chrysler, 186 F.3d at 1019 (The district court imposed the sanction under Rule
37 of the Federal Rules of Civil Procedure and the inherent authority of the court.).
Nevertheless, the guidance from the Court is clear, and we emphasize that the better
practice is to apply Rule 37 where appropriate and not allow an exercise of inherent
power to obscure the Rule 37 analysis. Societe Internationale, 357 U.S. at 207.
That is not to say that inherent powers are insufficient to justify the sanction of
dismissal in an appropriate case if a court makes an express finding of bad faith. See
Chambers v. Nasco, 501 U.S. 32, 49 n.14 (1991) (stating that Societe Interna-tionale
would not preclude a sanction of dismissal via a courts inherent power and noting
that the Court had held only that where Rule 37 was applied there was no need to
resort to . . . inherent power. (quoting Societe Internationale, 357 U.S. at 207)).
Rather, inherent authority is a broad and powerful tool. As such, it should be used
sparingly. Roadway Express, Inc. v. Piper, 447 U.S. 752, 764 (1980) (Because
inherent powers are shielded from direct democratic controls, they must be exercised
with restraint and discretion.). In general, then, courts first should turn to specific
rules tailored for the situation at hand, such as Rule 37, to justify sanctions. Then, as
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an alternative basis for support or in circumstances where specific rules are
insufficient, i.e., when there [is] a need, it may be appropriate to invoke their
inherent authority. Societe Internationale, 357 U.S. at 207; see also Chambers, 501
U.S. at 49 and 49 n.14 ([P]rior cases have indicated that the inherent power of a court
can be invoked even if procedural rules exist which sanction the same conduct, but
because individual rules address specific problems, in many instances it might be
improper to invoke one when another directly applies.).
It follows from this general rule that the best practice is to keep the structured
analysis for a particular rule separate from the relatively unstructured analysis
associated with inherent authority. In the present case, the district court based its
dismissal, in part, on its determination that Plaintiffs had violated five discovery
orders: four by failing to produce what it referred to in its order of dismissal as the
Walls documents, and one by failing to make Anton appear at the July 2006 hearing.
The district court also referred to its inherent authority and cited the email production,
the recorded-conversation production, Barazis purported lies, and the purported
attempt to bribe Anton as additional grounds in support of the dismissal sanction.
These latter issues may provide insight as to willfulness or bad faith, but they were
unrelated to any discovery orders, and as such, appear to support sanctions primarily
under the courts inherent authority. As per Societe Internationale, reliance upon such
authority seems to have obscure[d] analysis of the problem. 354 U.S. at 207.
Looking first at these non-discovery-order-related issues, we conclude that no
weight can be accorded to the alleged attempt to bribe Anton because there was no
reliable evidence to support the allegation. See Brooks v. Tri-Systems, Inc., 425 F.3d
1109, 111112 (8th Cir. 2005) (holding in the context of a dispositive motion that an
affidavit containing out-of-court statements offered for the truth of the matter asserted
may not be used to support or defeat a motion for final disposition of a case). Here,
the district court excused the hearsay nature of the affidavit based upon personal
knowledge of Ms. Badgers reputation for truthfulness. Her reputation for
-19-
truthfulness, however, only partially addresses one of the many layers of hearsay
embedded in her affidavit. Even assuming the phone call occurred and was reported
accurately by Ms. Badger, there are no indicia of reliability to support the truthfulness
or accuracy of the purported facts that: the man on the phone was who he claimed to
be; the man on the phone served as Antons private counsel; the man on the phone had
spoken to Anton about an alleged offer; some person had offered Anton money to
conceal documents; or the person who allegedly made an offer to Anton was a
principal or agent of Plaintiffs.
While the Federal Rules of Evidence do not necessarily apply in the context of
a motion for sanctions, evidence relied upon must, at a minimum, bear indicia of
reliability. See, e.g., Jensen v. Phillips Screw Co., 546 F.3d 59, 66 n.5 (1st Cir. 2008).
This is especially true when the sanction imposed is the draconian sanction of
dismissal with prejudice. Just as an affidavit containing hearsay and not otherwise
bearing indicia of reliability cannot support the final disposition of a case on summary
judgment, the present affidavit cannot support the present dismissal. See Brooks, 425
F.3d at 1112.
Ms. Badgers allegations are troubling to say the least, and our conclusion that
her affidavit was incapable of supporting the district courts judgment of dismissal
does not detract from the seriousness of her allegations. If Plaintiffs or their agents
actually offered to pay Anton to conceal evidence, the outcome of the sanctions
question becomes clear. In fact, it may become necessary to refer this matter for
possible prosecution. Allegations standing alone, however, cannot justify dismissal,
and it was error to rely upon the allegations in the infirm affidavit without an
investigation or an evidentiary hearing.
Because we must closely scrutinize the severe sanction of dismissal, and
because the present sanction rested on a hybrid analysis under Rule 37 and the courts
inherent authority, Schoffstall, 223 F.3d at 823, we cannot affirm the sanction once
3Defendants played a limited excerpt of Barazis videotaped deposition
testimony during their presentation at the sanctions hearing.
-20-
we have eliminated this substantial basis for support. Whether deemed relevant to the
question of willfulness regarding a Rule 37 sanction for willful violation of a
discovery order or to the question of bad faith for purposes of a sanction based on the
courts inherent authority, the court clearly based its dismissal, at least in part, on the
alleged offer to pay Anton.
We write further as to the dismissal issue because the other stated grounds for
dismissal involved resolution of close questions and interpretations of the record that
demand reexamination given our determination, as set forth below, that recusal is
merited. To the extent the court on remand might again view a pattern of conduct as
evidence of willfulness (as relevant to a possible Rule 37 violation) or, in the
alternative, as evidence of bad faith (as relevant to a possible inherent-authority
analysis), the court will need to address these issues anew.
Regarding the email, it is undisputed that both parties had multiple copies of the
email and the attachment, but both parties claimed not to possess an original,
unamended version. The district court stated, it was obvious that Barazi was lying.
Barazis purported lie regarding the email, however, amounted to nothing more than
his inability to recall the precise location from which he had sent an email three years
earlier.3 To the extent Barazi was not lying, it is not clear why the sender of an email
should be held any more accountable than the recipient for failing to produce an
original, unamended copy of the email or an attachment three years after it was sent.
Ultimately, the questions surrounding the email were close questions that involved
credibility assessments of persons who did not testify. In light of our resolution of the
recusal issue, the underlying determinations regarding the email issue cannot stand,
and we cannot view this issue as offering substantial support for the sanction decision.
-21-
Similarly, reliance on purported misrepresentations about the taped
conversations is problematic and should be reviewed on remand. Barazi actually
stated in his deposition that he taped at least three conversations: he answered in the
affirmative when asked if he had taped a conversation with a certain officer and if he
had taped conversations [plural] with another officer. Plaintiffs provided the tape of
the third conversation as an attachment to a motion and claimed later that the initial
failure to produce this material was an inadvertent error. While the district court was
not required to accept this assertion of inadvertent error, it would seem strange for a
party purposefully to conceal the existence of a taped conversation and then rely upon
and attach that taped conversation to a motion. Further, the court made no reference
to the content of, or possible prejudice related to, the tape in question.
In any event, Defendants supported their motion for sanctions with an excerpt
of different deposition testimony. In the excerpt that Defendants offered to the court,
Defendants attorney cut-off Barazis answer after asking him whether he had taped
additional conversations:
Q. Have you tape recorded any other conversations relating to your
MSO operations at Shell?
A. No, I mean.
Q. And have you videotaped any activities related to Shell, Shell
meetings, conversations, conferences.
At most, then, the record may contain inconsistencies regarding Barazis claims about
taped conversations. It is not clear that these inconsistencies resulted from lies.
Again, in light of our resolution of the recusal issue, we cannot view the current record
regarding the dispute over taped conversations as offering substantial support for the
sanction decision.
Regarding the production of documents generated, considered, or relied upon
by Walls, Defendants and the district court characterize the four discovery orders as
-22-
having called for production of the same documents. They did not. The orders each
contained slightly different descriptions of the documents to be produced, and
Plaintiffs read each order in a limited fashion to limit production. This behavior was
evasive and appears to have been directed toward protecting a claim of privilege.
While this behavior may have resulted in technical non-compliance with one or more
of the orders, the courts overly broad characterization of the orders demonstrates that
the orders were not clear, and it makes the existence of any non-compliance equally
unclear. Further, Plaintiffs apparent gamesmanship, while not admirable, is not
necessarily indicative of a willful violation of the orders.
We note also that evasiveness related to the production of these documents may
be excusable in this case because Plaintiffs presented a non-frivolous argument
regarding privilege, and Defendants admit the district court did not address the
privilege argument until the third order. Our court held in In re Bieter, 16 F.3d 929,
93940 (8th Cir. 1994), that privilege extended to communications between a nonemployee
contractor or consultant and a partys lawyer. We stated that a persons
technical status as an employee or contractor was not necessarily dispositive as to
privilege because oftentimes a party may rely upon and use a consultant in a manner
essentially equivalent to an employee. See id. at 938 (There is no principled basis
to distinguish [the consultants] role from that of an employee, and his involvement
in the subject of the litigation makes him precisely the sort of person with whom a
lawyer would wish to confer confidentially in order to understand Bieters reasons for
seeking representation. As we understand the record, he was in all relevant respects
the functional equivalent of an employee. (internal citations omitted)). As such, it
is not clear that the district court on remand necessarily will find a willful violation
rather than a careful attempt at compliance coupled with an attempt to preserve
privilege.
Finally, given the differences between the four orders for production of Wallsrelated
documents, we believe there was a lack of clarity in the orders. It is not clear
-23-
at this point that Plaintiffs interpretations of those orders and limited production
actually resulted in violations of the orders. Given the severity of the sanction of
dismissal, Plaintiffs substantial production of documents for in camera review
merited greater attention or, at a minimum, denial of the motion for in camera review
and delivery of the documents from the court to Defendants.
Regarding the related issue of purported misrepresentations as to Wallss and
Antons status, the district court found that Plaintiffs made misrepresentations on
several occasions. The court deemed this status relevant to more than the question of
privilege. The court deemed perceived misrepresentations about Wallss status to be
abuses of the judicial process. An example cited in the written order of dismissal was
Plaintiffs characterization of Walls as a non-employee, retained expert in a May 2006
filing. In that document, however, Plaintiffs did not represent that Walls was a
retained expert. Rather, they expressly characterized Walls as an employee, stating,
This motion arises from Shells unsupported efforts to limit Plaintiffs expert
testimony by refusing to permit Chris Walls, an employee and expert witness of
Plaintiffs, to view certain documents including the MSO Model and historic financial
information designated by Shell as highly confidential. Regarding Anton, it is not
clear that Plaintiffs ever represented to the court that Anton was anything but an
outside consultant after early 2005. The court cited the later-filed Missouri liquorlicense
applications as evidence that Plaintiffs had lied, but it is not clear that any
statements on these Missouri documents are inconsistent with Anton being a nonemployee.
Finally, regarding the issue of prejudice, the court stated:
Defendants have suffered prejudice from Plaintiffs conduct. After
months of litigation, Defendants, and this Court, have still not had the
ability to gain a clear picture of the discovery available and the roles of
the parties involved in this case. Defendants ability to conduct discovery
-24-
and counter Plaintiffs arguments has been destroyed by Plaintiffs
actions in this case.
We agree that Plaintiffs have not been forthcoming with their production, and as noted
above, they have been particularly evasive as to documents related to Walls. It
appears from the record on appeal, however, that everything that might be produced
has been produced to the court or to Defendants. Because the court had ordered
Plaintiffs to produce materials to Defendants, Plaintiffs election to produce the
materials for in camera review would seem to be a technical violation of the discovery
order. It is difficult, however, to call such a violation willful or to find prejudice
where it would have been a simple matter for the court to permit Defendants to view
or retrieve the documents.
Regarding the inability to obtain data from Anton, Defendants voluntarily
terminated Antons deposition and chose to pursue sanctions rather than pursue
discovery as to the payroll journal they deemed critical to their case. In sum, the
question of prejudice is, like the other questions presented below, a close question that
a new judge need not resolve in the same manner. We emphasize that, on remand, the
district court need not find Plaintiffs actions excusable, non-prejudicial, nor
innocuous. We note only that the present record contains several close questions as
to Plaintiffs willfulness, Plaintiffs violation of one or more discovery orders, the
existence of prejudice, and the appropriateness of the overall sanction of dismissal.
Given the appearance of partiality and the close scrutiny applicable to the severe
sanction of dismissal, these questions demand further examination.
b. Recusal / Reassignment
In the district court, Plaintiffs moved for recusal citing 28 U.S.C. 455(a).
Plaintiffs appeal the district courts denial of that motion and ask further that we
exercise our authority under 28 U.S.C. 2106 to assign the case to a different judge
-25-
on remand. The motion for recusal, filed nearly six months after the December 15
hearing, was untimely. See Tri-State Fin., LLC v. Lovald, 525 F.3d 649, 65354 (8th
Cir. 2008) (holding a recusal motion untimely when brought seven months after the
last act alleged as a basis for recusal); Rabushka ex rel. United States v. Crane Co.,
122 F.3d 559, 566 (8th Cir. 1997) (finding a 455(a) motion for recusal untimely
when filed after a district court granted summary judgment); In re Kan. Pub.
Employees Ret. Sys., 85 F.3d 1353, 1360 (8th Cir. 1996) (stating that 455 requires
timely action and that [m]otions to recuse should not be viewed as . . . additional
arrow[s] in the quiver of advocates in the face of [anticipated] adverse rulings.).
Nevertheless, because we have determined remand is appropriate, we may address the
issue of reassignment notwithstanding the untimeliness of the 455(a) motion. See
United States v. Tucker, 78 F.3d 1313, 132324 (8th Cir. 1996) (invoking the
authority of 2106 and directing reassignment to a different judge on remand even
though the party seeking reassignment had failed to present the issue of recusal to the
district court); see also Liteky v. United States, 510 U.S. 540, 554 (1994) (Federal
appellate courts ability to assign a case to a different judge on remand rests not on the
recusal statutes alone, but on the appellate courts statutory power to require such
further proceedings to be had as may be just under the circumstances. (quoting 28
U.S.C. 2106)).
We apply the 455(a) standard in determining whether to order reassignment
pursuant to 2106. Tucker, 78 F.3d at 1324 (equating the 455(a) appearance of
partiality standard with the standard for reassignment under 2106). In accordance
with that standard, recusal or reassignment is appropriate where impartiality might
reasonably be questioned by the average person on the street who knows all the
relevant facts of a case. In re Kan. Pub. Employees Ret. Sys., 85 F.3d at 135859
(applying 455(a)).
Although, in general, reassignment should rest upon an appearance of bias or
prejudice derived from an extrajudicial source, reassignment may be necessary based
-26-
solely on events transpiring in current court proceedings or on a courts statements or
rulings where they reveal such a high degree of favoritism or antagonism as to make
fair judgment impossible. Liteky, 510 U.S. at 554 (rejecting strict application of the
extrajudicial source doctrine). Here, there is no extrajudicial source indicating an
appearance of partiality. The proceedings leading up to and including the sanctions
hearing, however, and the ultimate order of dismissal, reflect a sufficiently high
degree of antagonism to require reassignment of the case on remand.
In the course of numerous in-person and telephone conferences and hearings,
the court directed profanities at Plaintiffs or Plaintiffs counsel over fifteen times. In
addition, at the December 15 sanctions hearing, the court denied Plaintiffs a
meaningful opportunity to respond following Defendants lengthy presentation, and
in doing so, misconstrued the language of its own discovery orders and dismissed
Plaintiffs attempt to explain those orders. The court adopted Defendants
characterization of the four discovery orders as all having required production of the
same Walls documents. This was the case even though the first three orders had
temporal or qualitative limitations on the documents subject to the order, and the third
order demanded only the production of one document. When Plaintiffs attempted to
explain at the sanction hearing that you have not ruled four times to give them those
58 documents, the district court cut off Plaintiffs and moved toward dismissal.
In these circumstances, we believe the reasonable man, were he to know all the
circumstances, would harbor doubts about the judges impartiality. United States v.
Poludniak, 657 F.2d 948, 954 (8th Cir. 1981). This is not merely a case, then, where
a courts use of salty language should be overlooked. See Liteky, 510 U.S. at 55556
(1994) (Not establishing bias or partiality, however, are expressions of impatience,
dissatisfaction, annoyance, and even anger, that are within the bounds of what
imperfect men and women, even after having been confirmed as federal judges,
sometimes display.). Here, the courts statements must be viewed in context
alongside the courts adoption of Defendants mischaracterization of the discovery
-27-
orders, its apparent distrust of Plaintiffs as manifested early in the litigation, and its
reliance on the Badger affidavit without giving Plaintiffs an opportunity for discovery
or a hearing as to its contents.
III. Conclusion
On remand, we encourage the court to consider a range of potential sanctions
and to examine each partys actions. Plaintiffs undoubtedly were evasive in
discovery, and Defendants appeared to have directed their efforts not toward effective
discovery, but toward exaggeration of ancillary issues (such as employment status)
and fanning the flames of the district courts discontent. In particular, we believe
remand should include but not be limited to: (1) examination of the materials provided
to the court for in camera review; (2) a careful analysis of the extent to which
Plaintiffs may have failed to comply with discovery orders; and (3) whether any noncompliance
was willful or was carefully calculated to preserve asserted privilege while
narrowly construing the different orders. To the extent it is alleged Plaintiffs
attempted to pay Anton to conceal evidence, the court on remand may need to conduct
an evidentiary hearing. Any findings regarding this allegation would likely factor
heavily into the sanctions analysis.
We reverse and remand for further proceedings.
GRUENDER, Circuit Judge, dissenting.
Because I do not agree with the Courts conclusions that the district court
abused its discretion in dismissing this case and that the case should be reassigned on
remand, I respectfully dissent.
Initially, I agree with the Court that the Plaintiffs motion for recusal was
untimely. See Tri-State Fin., LLC v. Lovald, 525 F.3d 649, 653 (8th Cir.), cert.
-28-
denied, 555 U.S. ---, 129 S. Ct. 630 (2008) (Motions for recusal under 28 U.S.C.
455 will not be considered unless timely made. The timeliness doctrine under 455
requires a party to raise a claim at the earliest possible moment after obtaining
knowledge of facts demonstrating the basis for such a claim. (internal quotations and
citation omitted)). In support of their recusal motion, the Plaintiffs cited the district
courts language at the December 15, 2006 hearing, along with other acts allegedly
reflecting the district courts partiality that took place between February and
December 2006. The latest of these events occurred at the December 15 hearing.
However, the Plaintiffs did not file their motion to recuse until June 1, 2007, nearly
six months after they learned that the district court would dismiss the case based on
the Plaintiffs systematic abuse of the discovery process. The Plaintiffs argue that this
prolonged delay demonstrates that they did not file [the] [m]otion in haste or without
careful consideration. While a party should fully examine the relevant facts and law
before filing a motion to recuse, it still must file a recusal motion in a timely manner,
which the Plaintiffs failed to do. Even assuming that the alleged partiality was not
manifest until the district court announced its decision to dismiss the case, I would
find the recusal motion to be untimely and would therefore affirm the district courts
denial of the motion regardless of its merits.
On the merits, I do not agree that either recusal or reassignment is warranted
here. As the Court correctly notes, the applicable standard for recusal or reassignment
is the existence of an appearance of partiality on the part of the judge. 28 U.S.C.
455(a). Ante at 25. The Court also correctly finds that there is no extrajudicial
source indicating an appearance of partiality. Ante at 26. To support its finding of
an appearance of partiality here, the Court points to the proceedings leading up to and
including the sanctions hearing, . . . and the ultimate order of dismissal as reflecting
a sufficiently high degree of antagonism to require reassignment of the case on
remand. Id. As the Supreme Court has explained, however, judicial rulings alone
almost never constitute a valid basis for a bias or partiality motion. Liteky, 510 U.S.
at 555. [O]nly in the rarest circumstances [can judicial rulings] evidence the degree
-29-
of favoritism or antagonism required . . . . Almost invariably, they are proper grounds
for appeal, not recusal. Id.
When discussing the proceedings leading up to the recusal motion, the Court
cites the district courts alleged mischaracterization of the discovery orders relating
to Wallss work product as a basis for reassignment. Ante at 27. Even if the district
courts first two orders did not explicitly address the Plaintiffs privilege claim, the
third and fourth orders did; thus, I am not convinced that the district court
mischaracterized the third or the fourth orders. In fact, the Plaintiffs filed a petition
for a writ of mandamus to the Eighth Circuit pertaining to the fourth order, which we
denied. Despite our denial of the petition for a writ of mandamus, the Plaintiffs still
had not complied with the fourth order by the December 15 hearing. Therefore, the
district courts alleged mischaracterization of its own orders, at least with respect to
the third and fourth orders, does not support this Courts decision to order
reassignment.
The Court also condemns the district courts attitude towards the Plaintiffs,
finding that the proceedings leading up to and including the sanctions hearing, . . .
and the ultimate order of dismissal, reflect[ed] [such] a high degree of antagonism
that the case must be reassigned. Ante at 26. However, according to the Supreme
Court,
opinions formed by the judge on the basis of facts introduced or events
occurring in the course of the current proceedings, or of prior
proceedings, do not constitute a basis for a bias or partiality motion
unless they display a deep-seated favoritism or antagonism that would
make fair judgment impossible. Thus, judicial remarks during the course
of a trial that are critical or disapproving of, or even hostile to, counsel,
4As an example of a judicial remark that revealed such a high degree of
favoritism or antagonism that fair judgment was impossible, the Supreme Court cited
this remark made by a district court in a World War I espionage case against
German-American defendants: One must have a very judicial mind, indeed, not [to
be] prejudiced against the German Americans because their hearts are reeking with
disloyalty. Liteky, 510 U.S. at 555 (quoting Berger v. United States, 255 U.S. 22,
28 (1921) (alteration in original)).
-30-
the parties, or their cases, ordinarily do not support a bias or partiality
challenge.
Liteky, 510 U.S. at 555.4
Although I do not condone the district courts language, its statements did not
express such a high degree of favoritism or antagonism to make fair judgment
impossible. At most, the district court vented its frustration over the Plaintiffs failure
to abide by its discovery orders. The Supreme Court has held that a party does not
establish bias or partiality by reciting expressions of impatience, dissatisfaction,
annoyance, and even anger, that are within the bounds of what imperfect men and
women, even after having been confirmed as federal judges, sometimes display. Id.
at 555-56. A judges ordinary efforts at courtroom administrationeven a stern and
short-tempered judges ordinary efforts at courtroom administrationremain
immune. Id. at 556. While the district court may have failed to maintain ideal
decorum, I cannot say that its statements were more than expressions of impatience,
dissatisfaction, annoyance, and even anger that were within the bounds of what
imperfect men and women . . . sometimes display. Id. at 555-56; see also United
States v. Wilkerson, 208 F.3d 794, 797-98 (9th Cir. 2000) (finding that recusal was not
necessary where the district court referred to the Governments actions as absurd
and asinine); Air-Sea Forwarders, Inc. v. Air Asia Co., 880 F.2d 176, 191 (9th Cir.
1989) (finding that recusal was not necessary where the district court stated that
counsel had misled the jury by blowing cloak and dagger smoke at it); In re
-31-
Beard, 811 F.2d 818, 830 (4th Cir. 1987) (finding that recusal was not necessary
where the district court called a partys attorney a son-of-a-bitch and a wise-ass
lawyer).
The Court justifies the Plaintiffs failure to obey the orders because Plaintiffs
presented a non-frivolous argument regarding privilege, and Defendants admit the
district court did not address the privilege argument until the third order. Ante at 22.
Whether or not the Plaintiffs presented a non-frivolous argument regarding privilege,
the district court had already clearly rejected their privilege claim. The third order
required the Plaintiffs to produce Walls work product that was currently being
withheld on grounds of privilege. The fourth order stated that the Plaintiffs must
produce any and all document[s] or analysis developed by Chris Walls
relating to this litigation, regardless of whether the document is claimed
as privileged or if Chris Walls relied upon said document. The
documents must be produced by noon on Monday, September 11,
[2006]. If these documents are not produced, Plaintiffs will not be
permitted to present the testimony of Mr. Walls at trial.
The Plaintiffs filed a petition for a writ of mandamus with the Eighth Circuit regarding
this discovery order, which we denied. Thus, at that point, the Plaintiffs could not
have been justified in delaying or withholding production of the documents after their
privilege claim had been rejected by both the district court and the Eighth Circuit.
Despite this fact, the Plaintiffs still had not produced the fifty-eight documents as of
the December 15 hearing. Instead, the Plaintiffs made a belated attempt to submit the
documents to the district court for in camera review, which I conclude was a willful
violation of the discovery order.
After learning on December 15, 2006, that the Plaintiffs had continued to
disobey its discovery orders by not producing the fifty-eight documents in question
when they were indisputably required to do so, the district court was understandably
5The Court explains that when analyzing a dismissal sanction, a Rule 37
analysis normally should stand alone and not blend together with a less-structured,
inherent authority analysis. Ante at 16. Because I agree with this proposition and
because I think that Rule 37 supports the dismissal here, I find it unnecessary to
discuss the e-mail production, the recorded-conversation production, Barazis
purported lies, and the purported attempt to bribe Anton. See id. at 18 (stating that the
district court relied on these issues only with respect to its inherent authority analysis,
not its Rule 37 analysis). Therefore, I limit my analysis to whether the Plaintiffs
willful refusal to produce the fifty-eight documents despite the district courts orders
and their willful failure to produce Anton for the July 6 hearing provided sufficient
justification for the dismissal under Rule 37.
-32-
perturbed. The district courts language was regrettable, but its comments do not
create an appearance of such a high degree of favoritism or antagonism to make fair
judgment impossible.
I also conclude that the district court did not abuse its discretion by dismissing
with prejudice the Plaintiffs lawsuit as a sanction for their willful discovery
violations. I recognize that dismissal is an extreme sanction. See Smith v. Gold
Dust Casino, 526 F.3d 402, 405 (8th Cir. 2008). However, it is appropriate here
because the Plaintiffs continually and willfully disobeyed the district courts discovery
orders by refusing to produce the fifty-eight documents, failing to produce Anton for
the July 6 hearing, and misrepresenting Antons employment status, all of which
prejudiced the Defendants. See id. (Dismissal with prejudice is an extreme sanction
and should be used only in cases of willful disobedience of a court order . . . .
(quotation and alteration omitted)).5
As explained above, even if the district court did not address the Plaintiffs
privilege argument until the third order, that order was issued on August 16, 2006,
four months before the December 15 hearing. The fourth order was issued on
September 8, 2006, more than three months before the December 15 hearing. And we
denied the Plaintiffs petition for a writ of mandamus on September 26, more than two
-33-
and a half months before the December 15 hearing. The third and fourth orders
clearly rejected the Plaintiffs privilege claim. This court refused to intervene. Rather
than comply with the orders by producing the fifty-eight documents to the Defendants,
the Plaintiffs once again sought to inhibit and delay discovery by belatedly submitting
the documents to the district court for in camera review. The Plaintiffs particularly
evasive tactics do not strike me as mere technical violation[s] of the discovery
order. Ante at 24.
Further, on June 30, 2006, the district court ordered the Plaintiffs to produce
Anton for a July 6, 2006 hearing. The Plaintiffs failed to produce him, claiming at the
July 6 hearing that they could not reach him because he was simply a hired outside
accountant and not an employee of the Plaintiffs. However, on June 22, 2006, Anton
signed an application for a liquor license renewal stating that he was the managing
agent for Sentis, and on June 29, 2006, Barazi signed an application to sell liquor,
which indicated that Anton was the managing officer for Sentis. From this evidence,
I cannot find fault with the district courts conclusion that Anton was, in fact, more
than a hired outside accountant such that the Plaintiffs misled the district court at the
July 6 hearing when they claimed that they could not produce him because he was not
their employee.
Based on these circumstances, I do not find an abuse of discretion in the district
courts determination that the Plaintiffs willfully violated the discovery orders by
failing to produce the fifty-eight documents to the Defendants and failing to produce
Anton for the July 6 hearing. See Hutchins v. A.G. Edwards & Sons, Inc., 116 F.3d
1256, 1260 (8th Cir. 1997) (Plaintiffs persistent failure to cooperate and their
disregard of the district courts orders make it clear that their conduct throughout these
proceedings was deliberate rather than accidental. Plaintiffs pattern of intentional
delay is the type of conduct for which the extreme sanction of dismissal with prejudice
is appropriate.).
-34-
Finally, I conclude that the Plaintiffs willful delay in producing the fifty-eight
documents and willful failure to produce Anton prejudiced the Defendants. Prejudice
includes deprivation of information through non-cooperation with discovery, and
costs expended obtaining court orders to force compliance with discovery. Adams
v. Trustees of the N.J. Brewery Employees Pension Trust Fund, 29 F.3d 863, 874 (3d
Cir. 1994). While the Court argues that there is no prejudice because [i]t appears
from the record on appeal . . . that everything that might be produced has been
produced to the court or to Defendants, ante at 24, [p]rejudice need not be [an]
irremediable harm, Adams, 29 F.3d at 874 (quoting Curtis T. Bedwell & Sons, Inc.
v. International Fidelity Insurance Co., 843 F.2d 683, 693 (3d Cir. 1988)). The
Plaintiffs willful delay in producing the fifty-eight documents required Defendants
to spend their time and resources attempting to enforce the district courts orders
rather than completing discovery and preparing for trial. See Schoffstall, 223 F.3d at
824 (finding prejudice when plaintiffs failure to produce medical records required
[the defendant] to spend its time hounding her for releases the court had already
ordered her to provide). The district court did not abuse its discretion by determining
that the Plaintiffs delay in producing the fifty-eight documents and their failure to
produce Anton for the July 6 hearing constituted willful violations of the discovery
orders that prejudiced the Defendants and thereby justified the dismissal of the
Plaintiffs lawsuit under Rule 37.
Accordingly, I would affirm the judgment of the district court.
______________________________
 

 
 
 

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