Management Registry, Inc. v. A.W. Companies, Inc.

Background

Management Registry, Inc. (MRI) alleged that the defendants and their counsel repeatedly failed to meet discovery obligations. The court described the defendants’ electronic-document production as unusable for an extended period because files were corrupt or would not render, documents lacked or duplicated Bates labels, and the production was not properly organized or linked to discovery requests. After the technical problems were eventually addressed, MRI asserted that important categories of information—including financial records, tax information, communications, and employee-related documents—were still missing.

The court had previously ordered the defendants to make usable and organized productions, supplement their responses, search specified email accounts and communications, produce financial information, and comply with additional discovery requirements. The defendants’ compliance remained inadequate, and MRI filed motions to compel, requests for sanctions, and fee petitions. MRI initially sought more than $460,000 in fees, costs, and expert expenses in one petition.

Rulings on Discovery Sanctions and Fees

The court concluded that the defendants violated several discovery orders and that monetary sanctions were warranted. It declined, however, to recommend dispositive sanctions—sanctions that could end the case or prevent a party from presenting claims or defenses—because the case could still be resolved on its merits. It also declined to recommend contempt sanctions.

The court ordered the defendants and their counsel to pay MRI $16,018.93 for reasonable expenses, including attorney’s fees, incurred in bringing MRI’s June 3, 2019 motion to compel. That amount included $15,000 in attorney’s fees and $1,018.93 in costs. The court rejected MRI’s request for fees attributable to the earlier period from December 2018 through June 24, 2019, finding that the circumstances during that period made an award unjust.

The court granted in part MRI’s September 27, 2019 fee petition and ordered the defendants and their counsel to pay $50,000 in reasonable attorney’s fees caused by failures to comply with the June 24 and July 31, 2019 discovery orders. It declined to award the additional e-discovery and expert expenses requested because MRI had not shown clearly that those amounts were caused by violations of the court’s orders.

The court granted in part MRI’s October 24, 2019 motion to the extent it sought reasonable expenses and attorney’s fees for bringing that motion. MRI was ordered to submit a fee petition, after which the defendants and Mr. Loftus could respond. The court separately recommended that the motion be denied in part to the extent it sought dispositive sanctions.

Sanctions Against Counsel and Additional Requirements

The court recommended that the District Court sanction defense counsel Alexander Loftus under 28 U.S.C. § 1927. That statute permits a court to require an attorney to personally pay fees and costs caused by unreasonably and vexatiously multiplying proceedings. The court identified several examples, including Mr. Loftus’s refusal to follow a meet-and-confer instruction, filing motions without adequately reviewing discovery, filing an unnecessary motion to strike, failing to provide a required declaration, and labeling financial documents “Irrelevant Non-Responsive Misc. Invoices.” The amount of the recommended sanction was left for a later supplemental report after MRI submitted another fee petition and Mr. Loftus responded.

The court also recommended that the District Court use its inherent authority to instruct the jury that the defendants failed to cooperate in discovery and that the jury could infer from that failure that the defendants attempted to conceal information unfavorable to their position. The order required local defense counsel Justin A. Bruntjen to be copied on all correspondence between counsel and to attend all hearings, in addition to previously required oversight of the defendants’ court filings.

Judge Katherine Menendez set a later objection deadline: objections to this decision and the supplemental decision would be due within 14 days after the supplemental Order and Report and Recommendation was filed.