Thani A.T. Al Thani v. Hanke

Background

These consolidated actions concern allegations that the Hanke Defendants, with help from other defendants, defrauded Mohammed Thani A.T. Al Thani and Martin John Stevens of millions of dollars. Al Thani asserted nine claims, including contract, fraud, fiduciary-duty, and Investment Advisers Act claims. The sanctions motion was brought only by Al Thani; Stevens did not join it.

Discovery began in 2020. The court ordered the Hanke Defendants to substantially complete production of documents by November 30, 2020, and later set another substantial-completion deadline of May 18, 2021. The court found that Hanke and IOLO repeatedly failed to meet those requirements. They initially produced only a small portion of potentially responsive materials, delayed reviewing additional materials, and did not complete production until June 13, 2022, when responsive WhatsApp messages were produced. The court found that the sanctionable periods were November 30, 2020 through February 16, 2021, and May 24, 2021 through June 9, 2021.

Legal standard

Federal Rule of Civil Procedure 37(b) allows a court to impose sanctions when a party disobeys a specific discovery order. Possible sanctions include payment of reasonable expenses, including attorneys’ fees, caused by the violation; limits on evidence; striking pleadings; contempt; default judgment; or dismissal. Sanctions must be fair and proportionate to the noncompliance. The court considered the willfulness of the violations, whether lesser sanctions would work, the duration of the violations, and whether the parties had been warned about possible sanctions.

Rulings on the Hanke Defendants

The court declined to impose sanctions based on Al Thani’s contention that the Hanke Defendants’ interrogatory responses were inadequate. Rule 37(b) sanctions require violation of a clear court order. The Hanke Defendants had supplemented their interrogatory responses, and Al Thani disputed their quality rather than identifying a failure to comply with an order requiring a particular response.

The court found, however, that Hanke and IOLO violated explicit orders concerning document production. It found those violations willful, noting the clear deadlines, the extended delays, the lack of an adequate explanation for the missing materials, and Hanke’s acknowledgment that Herndon had explained the importance of producing responsive documents. The court also found that monetary sanctions would effectively remedy the harm and that harsher sanctions were unnecessary because the Hanke Defendants ultimately completed their production.

The court therefore granted sanctions against Hanke and IOLO. They must pay, jointly and severally, the reasonable incremental attorneys’ fees and costs incurred by Al Thani because of the discovery-order violations during November 30, 2020 through February 16, 2021, and May 24, 2021 through June 9, 2021. Joint and several liability means that each is responsible for the full amount owed. The court declined to impose additional monetary sanctions for other periods or nonmonetary sanctions, including striking the Hanke Defendants’ affirmative defenses. Al Thani was directed to submit supporting documentation for the fees and costs.

The court did not hold the Hanke Defendants responsible for the omission of WhatsApp messages from the April 8, 2022 production because the record did not show that Hanke knew the messages were stored in the cloud and could be retrieved. The court likewise did not fault them for missing text messages where the discovery vendor had initially failed to extract them.

Rulings on Thomas H. Herndon

Rule 37(b)(2)(C) also permits monetary sanctions against an attorney who advised the party. The court found that Herndon violated the April 6, 2022 order requiring the Hanke Defendants to respond to all outstanding discovery requests by April 8. Herndon provided more than 22,000 documents without reviewing the production to ensure it included responsive text and WhatsApp messages. Those materials were produced later after Al Thani’s counsel identified the omission.

The court found Herndon’s failure unacceptable but considered the violation less serious than the Hanke Defendants’ conduct. It also considered that Herndon had not been paid for much of his work, had continued representing difficult clients, had paid $12,000 to the discovery vendor from his own funds, and had helped complete the production. The court concluded that more substantial sanctions would be unjust.

Disposition

Judge John P. Cronan granted Al Thani’s sanctions motion as set forth above. Hanke and IOLO were ordered to pay the specified reasonable incremental attorneys’ fees and costs, and Herndon was ordered to pay $500 to Al Thani for failing to review the April 8, 2022 production. The Clerk of Court was directed to close the sanctions-motion docket entry.