Court orders compelling discovery production continue to be disregarded and even flouted by some companies. But judges are growing intolerant of such behavior. In a May 3 decision peppered with colorful commentary, Judge Neil Gorsuch, writing for a 10th Circuit panel, firmly responded in Lee v. Max International. The decision affirmed a district court order dismissing the case because the plaintiff repeatedly violated court orders to produce documents.   

“Discovery is not supposed to be a shell game, where the hidden ball is moved round and round and only revealed after so many false guesses are made and so much money is squandered,” Judge Gorsuch wrote.

Markyl Lee and his wholly owned company, Promises to Keep, filed a breach of contract suit in 2009 against Max International, a network marketing company that sells nutritional products, regarding a disputed distributorship agreement. After Lee failed to comply with an October 2009 order to produce tax records, releasing only a “trickle of documents,” the defendant filed a motion for sanctions seeking dismissal of the case. When the magistrate judge hearing the motion gave Lee a second chance to comply in January 2010, she advised him that “continued non-compliance will result in the harshest of sanctions.”

False Filing

Responding early, the plaintiffs attorneys filed a declaration under penalty of perjury certifying that they had produced all of Lee’s tax records. But despite Lee’s company’s name, he did not keep his promises: Attorneys for Max International subsequently discovered that all tax records had not been produced as ordered and renewed their motion to dismiss.

Lee finally released all tax records by Feb. 26, 2010, the deadline set by the court order. He went on to argue that because they eventually complied with the order, the false declaration should not matter. The circuit court found that was not enough reason to let the plaintiff continue the case.

“Parties that fail to timely and adequately comply with their discovery obligations often argue: ‘No harm, no foul,’” says Miller Canfield partner Jay Yelton. “One of the most significant aspects of the 10th Circuit’s opinion is the court’s clear and convincing rejection of that argument.”

The appeals court noted that the plaintiffs produced the tax records only after the defendant’s attorneys uncovered the falsity of the declaration, forcing them to file yet another motion concerning their production. After noncompliance with the initial discovery request and two orders to comply, the circuit panel held that “three strikes are more than enough to allow the district court to call a litigant out.”

Lee provides valuable guidance on the steps a party must take to ensure compliance with the rules of discovery.

“The defendant pursued document discovery early in the case, and then stayed on top of the plaintiffs’ compliance by quickly following up with letters identifying the missing documents, and by filing timely motions to compel and for sanctions,” Yelton says. “It takes time and effort to lay the foundation for this three-strike process to play out. The defendant in Lee did exactly what is needed to lay that foundation.”

Lee v. Max International is about long-standing basics of discovery compliance, applicable to both paper and digital records, says John Tredennick, a former trial lawyer who founded e-discovery vendor Catalyst Repository Systems.

District Discretion

Some district courts have been reluctant to issue sanctions in discovery cases, particularly affecting the merits of a discovery case or directing other substantial penalties, because of fear of reversal. Yelton predicts that Judge Gorsuch’s opinion will be cited in arguments that trial courts have this power and should exercise it.

The Lee opinion, Yelton says, “also is noteworthy because of the appellate court’s recognition that it should accord great deference to district courts in deciding discovery disputes.” The opinion reaffirmed that district courts enjoy “very broad discretion to use sanctions where necessary.”

While many such cases have not reached the appeals court level, those that do often reaffirm the district court decisions.

“More and more, even in a complicated discovery process, circuit courts view district courts as akin to baseball umpires who see a play on the field and must call it, with circuits reluctant to reverse any but clear-cut missed calls,” says Tredennick.

Judge Gorsuch took a more Zen-like approach to explaining his decision to uphold the district court’s ruling. “There is such thing as discovery karma,” he wrote. “Discovery misconduct often may be seen as tactically advantageous at first. But just as our good and bad deeds eventually tend to catch up with us, so do discovery machinations.”