Darmer v. Jenkins-Jones

Background

Steven Darmer sought insurance benefits from State Farm after his St. Paul home was damaged by fire on November 15, 2016. Darmer claimed State Farm failed to pay the full benefits required under the relevant policies. He hired Troy Brown as a public adjuster and entered an August 23, 2017 repair contract with Ultimate Restoration, Inc. The original contract estimated rebuilding costs at $954,385.05. On the same day, Darmer signed an amendment setting a new contract amount of $519,135.09, accompanied by a lower repair estimate.

Brown sent State Farm the original contract but not the amendment or the lower estimate. State Farm did not learn about those documents until Ultimate Restoration produced them during discovery. State Farm also obtained twelve emails between Darmer and Brown from Brown’s company, DTL Global. The emails included communications that State Farm characterized as damaging to Darmer’s claims, including one in which Darmer advised Brown not to cooperate with State Farm’s investigation and another concerning whether the home was a total loss.

Discovery violations

State Farm served document requests in December 2017. Darmer initially produced flash drives containing thousands of pages or more than 20,000 files, with little organization and irrelevant material. In an October 5, 2018 order, the court required Darmer to improve the production, review it for relevance and responsiveness, remove irrelevant material, determine confidentiality designations, and provide some organization.

The court concluded that Darmer violated that order. The November 2018 production did not include the amended contract documents or any of the twelve Brown-Darmer emails. The court found that nine of the emails had been included in the earlier, unusable production but were removed from the later production, while three appeared never to have been produced by Darmer. Darmer later produced the amended contract documents in April 2019 after State Farm discovered their existence, and State Farm took Brown’s and Chris Kosek’s depositions a second time.

The court also determined under its inherent power—the authority federal courts use to manage litigation—that the discovery conduct was significant, persistent, and troubling. It found that failing to disclose the amended contract documents and the emails abused the discovery process and constituted bad faith. The court rejected explanations based on Darmer’s uncertainty about whether he retained the documents, his lack of technological skill, and his assertion that Brown’s production should count as Darmer’s production. The court also found that Beckmann had not provided adequate supervision over the collection and production of documents and had not made a reasonable inquiry into whether the discovery responses were complete and correct.

Sanctions and recommendation

State Farm requested several sanctions under Federal Rule of Civil Procedure 37 and the court’s inherent power, including treating certain matters as established, striking allegations and documents, requiring negative-inference instructions, ordering a forensic examination of Darmer’s computers, and awarding expenses and attorney’s fees.

The court found that sanctions were warranted. It ordered State Farm to submit a petition for its reasonable expenses, including attorney’s fees, incurred in bringing the sanctions motion and conducting the second depositions of Brown and Kosek. The opinion states that those expenses should be shifted to Darmer, Beckmann, or both, but the amount and allocation remained to be addressed through the fee-petition process.

The court found the other requested sanctions unnecessary at that time. It did not require a forensic examination, strike the original repair contract or estimate, strike Paragraph 8 of Darmer’s Second Amended Complaint, treat specified matters as established, or require a negative-inference instruction. The court instead ordered that State Farm’s motion for sanctions was granted in part and recommended that the District Court permit cross-examination about Darmer’s failure to produce the amended contract documents and the Brown-Darmer emails, the October discovery order’s requirements, and the later removal of the emails from the November 2018 production. The District Court would determine the scope of that questioning.