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Because it delayed producing hundreds of thousands of documents in discovery, Mariner Health Care has lost its shot at hundreds of millions of dollars. After a day-long hearing Thursday, Fulton County State Court Judge Susan B. Forsling imposed “the ultimate sanction” of dismissal with prejudice on the Atlanta-based health care company’s $500 million accounting fraud claim against PricewaterhouseCoopers. “Given the magnitude of this case, this is an extremely difficult decision,” Forsling said, her voice straining with emotion as she announced her ruling to the courtroom. She went on to say she could not ignore the “overwhelming facts” that displayed Mariner’s “conscious indifference to the consequences of failure to comply” with her orders. At Thursday’s hearing, an attorney for Mariner, ninth-year Jones Day associate Joseph E. Finley, stood before the judge and said his client never “willfully” violated the court’s orders. However, the plaintiffs may have been “foolishly optimistic” about their ability to handle the massive discovery production needed for a case this size. At times, Mariner’s case suffered some “self-inflicted wounds” during discovery, he acknowledged. But the company was “the victim of accounting fraud” and still has “significant claims” that need to be litigated. “Even if it was foolishly optimistic, there was a belief we could meet the deadlines,” Finley told Forsling. “We worked like crazy to meet the deadlines.” Across the aisle, the lawyer who argued in favor of the dismissal for PricewaterhouseCoopers, John A. Chandler of Sutherland Asbill & Brennan, spent the better part of the afternoon outlining a dozen or so of Mariner’s “violations and abuses” of the discovery process. In his more than three decades of practicing law, Chandler said, he had never filed a motion for sanctions under O.C.G.A. �9-11-37. He told Forsling that the plaintiffs “got religion” only after PricewaterhouseCoopers filed its motion seeking to have the case dismissed because of the discovery problems. “They got religion just like the people you sentence to jail get religion,” he said to Forsling. Chandler emphasized that Mariner’s lawyers pushed to stay on schedule for the earliest possible trial date — in January 2006 — but at the same time refused to hand over all the documents necessary for PricewaterhouseCoopers’ defense. The tipping point in the case came in May, when PricewaterhouseCoopers complained that Mariner was not producing documents — or was dumping hundreds of thousands of pages all at once — and yet was pressing for the depositions of several former and current PricewaterhouseCoopers employees to start in early June. It was then that PricewaterhouseCoopers’ lawyers filed a motion for sanctions, asking for a dismissal with prejudice. CLAIMS OF ACCOUNTING FRAUD The litigation arose from Mariner’s allegations that it paid too much to acquire a company that vastly overstated its earnings and profitability with the help of PricewaterhouseCoopers. Mariner Health Care Inc., a publicly traded company, owned or operated 262 nursing and assisted living homes as well as 11 long-term acute care hospitals as of March 31. The company recently has enjoyed some profitability, but it’s been a long road back to prosperity after a bankruptcy and claims of accounting fraud. At Thursday’s hearing, Chandler said that prior to filing suit, Mariner spent $2.8 million during its two-year bankruptcy period beginning in 2000 to investigate possible claims against the Big Four accounting firm and other defendants. The health care company filed suit in Fulton State Court in August 2002, a little more than three months after emerging from bankruptcy. Mariner Health Care Inc. v. PricewaterhouseCoopers, No. 02-VS-037631-F (Fult. St. filed Aug. 29, 2002). MISSED DEADLINES During the course of the ensuing discovery battles, Mariner attempted to shield various documents by arguing that they were work-product or were protected by attorney-client or accountant-client privilege. The health care company lost most of those bids and was forced to disgorge more than 22.5 million documents to lead defendant PricewaterhouseCoopers. But the documents were not always produced on time. In one instance, Mariner lawyers’ told the court they would turn over certain third-party documents within 30 days. However, it took more than a month after the deadline passed for Mariner to deliver just the first portion of those documents. At other times, Mariner dumped hundreds of thousands of pages all at once. Chandler said his firm received 770,000 pages of discovery beginning one day before a mid-January deadline and continuing until 9 p.m. on the day discovery was supposed to be completed. And while that volume of paperwork was substantial, the Sutherland Asbill lawyers would later learn that they had not received everything they asked for — including several boxes of documents concerning a key witness. ‘HIT THE RESET BUTTON’ Thursday was not the first time a hearing was scheduled for PricewaterhouseCoopers’ motion for sanctions seeking to have the case dismissed with prejudice. Forsling had scheduled the first hearing last July, but the day before the alleged discovery abuses could have ended its two-year fight in State Court, Mariner tried to avoid a dispositive dismissal. The plaintiffs dismissed the case themselves and refiled next door in Fulton Superior Court. With that move, the Jones Day lawyers, led by senior litigation partner Richard M. Kirby, managed to replace Forsling with Judge Thelma Wyatt Cummings Moore as the new referee in the fight. Mariner v. PricewaterhouseCoopers, No. 2004CV88688 (Fult. Super. filed July 22, 2004). But PricewaterhouseCoopers’ lawyers filed a motion to strike the dismissal and thus brought the parties back to Forsling’s courtroom on Thursday for one more hearing. Because of a family emergency, Kirby did not attend the hearing. With the exception of the other Jones Day lawyers, no representative from Mariner came to Forsling’s courtroom Thursday. Sutherland Asbill partner Elizabeth V. Tanis argued in favor of PricewaterhouseCoopers’ motion to strike the plaintiffs’ dismissal. She based much of her presentation on a construction of the Georgia Civil Practice Act that essentially said the act’s counterclaim provision barred the plaintiff from dismissing the action because there were third-party claims that could not be independently adjudicated following the dismissal. Also, Tanis noted that the dismissal was prohibited because PricewaterhouseCoopers had a pending claim for affirmative relief against the plaintiff in the form of the motion for sanctions. In response, Jones Day’s David C. Kiernan, a third-year associate, disputed whether a motion for sanctions could constitute a pending claim for affirmative relief. As far as Mariner’s right to dismiss the action, Kiernan argued that the plaintiff almost always retains the right to “hit the reset button” despite any inconvenience it may have for the other parties involved. “It’s so that the plaintiff can have their day in court,” Kiernan said. “Something goes wrong, hit that reset button.” THE LIGHTEST SANCTION Forsling ultimately agreed with Tanis’ interpretation of the Civil Practice Act, saying the statutes prevent the plaintiff from dragging all the parties into court and then dismissing the action and leaving all the other claims “flapping in the wind.” Later, the judge assessed the propriety of dismissing Mariner’s claim. She noted that courts are supposed to impose the lightest sanction possible in order to correct a situation. In this case, Forsling could have imposed monetary sanctions, or she could have stayed the proceedings. But the judge said she didn’t think Mariner would be affected by either of those options. On one hand, Mariner already had demonstrated that it doesn’t mind a stay because, by dismissing the State Court action and refiling in Superior Court, the company set itself back at least another year. On the other hand, Forsling already threatened Mariner with monetary sanctions, but that threat apparently wasn’t enough to prevent it from missing the court-ordered discovery deadlines. “I just don’t know if it would do any good,” she said. A ‘WELL-DESERVED’ RESULT An attorney from the PricewaterhouseCoopers general counsel office, Margaret McIntyre Enloe, sat through Thursday’s proceedings. She was satisfied with the judge’s decision. “It’s a wonderful result that I think is well-deserved under the circumstances,” she said. The Jones Day lawyers declined to speak with a reporter after the hearing. A message left for Kirby at his office was not returned. A spokeswoman for Mariner sent the Fulton County Daily Report an e-mail statement from the company. “We are very disappointed by the Judge’s decision and respectfully believe she erred in both of her rulings. We believe her striking of our voluntary dismissal conflicts with well-established Georgia law. We also believe her striking of our complaint is clearly erroneous, especially in light of the fact that Mariner never refused to produce any documents. In fact, Mariner produced over 21 million pages of documents before the document production deadline had expired.” The statement went on to say, “We have been advised by our outside counsel that there is no precedent for imposing the ultimate sanction of dismissal at a time when the trial date is almost two years away, no depositions have been taken at the time of supplemental productions, and no parties have been prejudiced. We are obviously considering all available options, including an appeal.”

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