gold scales law books and a gavel Federal Rule of Civil Procedure 37(c)(1) provides that a court may sanction a party that fails to comply with the disclosure requirements of Rule 26(a) or fails to supplement its disclosures as required by Rule 26(e). If the failure to disclose or supplement is not substantially justified or harmless, the court may impose sanctions that include preclusion of undisclosed evidence and fee-shifting.

For example, in Design Strategy v. Davis, 469 F.3d 284 (2d Cir. 2006), the plaintiff failed to provide a computation of its lost profits damages as required by Rule 26(a). The defendants moved under Rule 37(c)(1) to preclude all evidence of lost profits at trial and the motion was granted. The Second Circuit affirmed on the grounds that the plaintiff had provided no justification for its failure to disclose and the defendants would have been severely prejudiced by having to prepare for lost profits evidence at trial. Such an outcome furthers Rule 37(c)(1)’s goal of preventing parties from unfairly surprising their adversaries with previously-undisclosed evidence.

However, the preclusion sanction is not automatic. Design Strategy, 469 F.3d at 298. A party that attempts to use Rule 37(c)(1) to obtain an unfair tactical advantage over its adversary will likely be denied preclusion. For example, a party misuses Rule 37 when it moves for sanctions instead of pressing for more complete disclosures. See, e.g., Oakley v. Federation Employment & Guidance Svcs., No. 10 Civ. 7739(JSR), 2011 U.S. Dist. LEXIS 76896, at *11 (S.D.N.Y. July 12, 2011) (“plaintiff’s counsel was more interested in sanctioning defendants in order to gain a tactical advantage than in actually obtaining answers to the questions that were allegedly improperly answered”). In addition, by making no objection until after discovery closes, the movant can attempt to render the adversary’s nondisclosure irremediable except by preclusion. Cf. Design Strategy, 469 F.3d at 297 (holding movants prejudiced by need to reopen discovery and affirming preclusion sanction). As one court put it, “[a] motion for sanctions after the close of discovery should not be brought as a substitute for defendants’ attentive pursuit of evidence during discovery.” Kennedy v. Supreme Forest Products, No. 3:14-cv-01851(JAM), 2017 U.S. Dist. LEXIS 77005, at *4 (D. Conn. May 22, 2017).

Although lying in wait appears to rule out preclusive sanctions under Rule 37(c)(1), somewhat surprisingly, several courts in the Second Circuit have imposed lesser sanctions notwithstanding that the movant improperly delayed making the motion.

Nevertheless, when a party is aware that its adversary has failed to fully comply with Rule 26, it should promptly raise the matter with the adversary. Only if attempts to remedy the nondisclosure through meet-and-confer efforts fail should the party move, promptly, for an order precluding the undisclosed evidence under Rule 37(c)(1).

Rule 26

Rule 26(a)(1) requires parties to disclose—without awaiting a discovery request—information about the witnesses they may use to support their claims or defenses, documents they may use to support their claims and defenses, a computation of each category of damages sought and the evidence on which the computation is based, and any insurance agreements under which the party may be indemnified or reimbursed for a judgment. Under Rule 26(a)(2), parties are required to disclose the identity of any expert witness they may use at trial, and testifying expert witnesses must disclose a written report containing the information specified in Rules 26(a)(2)(B)(i) through (vi). Under Rule 26(e), a party who has made a disclosure under Rule 26(a) (or responded to an interrogatory, request for production, or request for admission) must supplement or correct its disclosure in a timely manner if the disclosure is incomplete or incorrect in some material respect and the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing.

Rule 37(c)(1)

Rule 37(c)(1) provides that a failure to provide disclosures required by Rules 26(a) or 26(e) is sanctionable if the failure is not substantially justified or harmless.[see note 1] Preclusion of undisclosed evidence is a “drastic” sanction. John B. Hull v. Waterbury Petroleum Products, 845 F. 2d 1172, 1176 (2d Cir. 1988).

Although the Advisory Committee Notes to the 1993 amendment to Rule 37 state that the preclusion sanction is automatic (“This automatic sanction provides a strong inducement for disclosure of material that the disclosing party would expect to use as evidence”), the Second Circuit has held to the contrary: “the plain text of the rule provides that if an appropriate motion is made and a hearing has been held, the court does have discretion to impose other, less drastic, sanctions.” Design Strategy, 469 F.3d at 298.[see note 2]

Alternatives to preclusion available under Rule 37(c)(1) include “payment of the reasonable expenses, including attorney’s fees, caused by the failure” and informing the jury of the party’s failure to disclose. Rule 37(c)(1)(C) provides that a court may impose “other appropriate sanctions” including those listed in Rules 37(b)(2)(A)(i) through (vi).[see note 3]

Courts in the Second Circuit use a four-factor balancing test to determine whether evidence should be precluded under Rule 37(c)(1): “(1) the party’s explanation for the failure to comply with the [disclosure requirement]; (2) the importance of the testimony of the precluded witness[es]; (3) the prejudice suffered by the opposing party as a result of having to prepare to meet the new testimony; and (4) the possibility of a continuance.” Design Strategy, 469 F.3d at 296.

“The purpose of the rule is to prevent the practice of sandbagging an opposing party with new evidence.” Haas v. Del. & Hudson Ry. Co., 282 Fed. App’x 84, 86 (2d Cir. 2008). The rule can also serve “to protect other parties to the litigation from prejudice resulting from a party’s noncompliance with discovery obligations.” Southern New England Telephone Co. v. Global NAPs Inc., 624 F. 3d 123, 149 (2d Cir. 2010).

Misuse of Rule 37(c)(1)

Rule 37(c)(1) can be misused for tactical purposes by parties who move for preclusion without having sought more complete disclosure. For example, in Rupolo v. Oshkosh Truck, 749 F. Supp. 2d 31 (E.D.N.Y. 2010), a defense expert submitted a report that failed to meet the requirements of Rule 26(a). Instead of seeking a more complete report, the plaintiffs waited more than a year and then, after discovery had closed, moved to preclude the expert’s testimony under Rule 37(c)(1). The court denied the motion to preclude, stating that “any prejudice Plaintiffs might suffer is a result of their own decision to wait so long before objecting to the report.” Id. at 41.

Courts frown upon tactical misuse of Rule 37. “The rules of discovery were not designed to encourage procedural gamesmanship, with lawyers seizing upon mistakes made by their counterparts in order to gain some advantage.” Outley v. City of New York, 837 F. 2d 587, 590 (2d Cir. 1988). “Rule 37(c) is designed to deter a party from sandbagging an opponent at trial with information that the opponent did not know existed, not to permit a party to gain an unfair tactical advantage by knowingly sitting on its rights.” Lee Valley Tools. v. Industrial Blade Co., 288 F.R.D. 254, 262 (W.D.N.Y. 2013). A party that seeks sanctions instead of the information it has requested from its adversary is engaging in “sheer gamesmanship.” Oakley, 2011 U.S. Dist. LEXIS 76896, at *12. See also Nemec v. Shrader, No. 09 Civ. 7466 (LAK), 2015 U.S. Dist. LEXIS 51221, at *8 (S.D.N.Y. April 13, 2015) (“Were the Court to grant the plaintiffs’ motion, it in effect would encourage parties to stay silent as to some discovery disputes during pre-trial proceedings, and thus to lie in wait until long after discovery is complete only to ambush their unsuspecting adversaries with charges of wrongdoing on the eve of trial.”).

Consequences of Lying in Wait

Those who lie in wait to move under Rule 37(c)(1) are likely to discover that preclusion of undisclosed evidence is not automatic in the Second Circuit. Although the four-part Design Strategy test does not explicitly take into account whether the movant delayed making the motion, courts in the Second Circuit will deny preclusion on the ground that a party who has silently waited until discovery has closed before moving is responsible for any prejudice it suffers (the third Design Strategy factor). For example, in Hannah v. Wal-Mart Stores, No. 3:12-CV-01361 (VAB), 2017 U.S. Dist. LEXIS 38560 (D. Conn. March 17, 2017), the defendants listed seven previously-undisclosed witnesses in a pre-trial memorandum and plaintiff did not promptly object or seek leave to depose the witnesses. Six months later, the plaintiff filed a motion to preclude, arguing that she was prejudiced by having to face trial witnesses she had not deposed. The court held that no sanctions were warranted because the plaintiff had made no previous efforts to object or depose the new witnesses and therefore “any prejudice to [plaintiff] from the testimony of these witnesses would be due to the inaction of Plaintiff’s counsel, not Defendants’ Rule 26 violations.” Id. at *8.

Similarly, in Atkins v. County of Orange, 372 F. Supp. 2d 377 (S.D.N.Y. 2005), the court agreed with defendants that plaintiffs’ expert report failed to adequately disclose the basis for her opinions but refused to preclude her testimony because, “while defendants may be prejudiced by the deficient report, they had over a year to object to the report; thus, any prejudice is a result of their tactical decision to wait until a few months before trial to seek preclusion.” Id. at 397.

The movant’s delay may lead the court to be skeptical that the movant was prejudiced at all. For example, in Optigen v. Int’l Genetics, 877 F. Supp. 2d 33 (N.D.N.Y. 2012), the court found that plaintiff’s expert disclosure was not timely but denied defendants’ motion for preclusion or sanctions. The court found there was no prejudice to the defendants because the defendants failed to object or seek preclusion until their response to the plaintiff’s motion for summary judgment, almost five months after the disclosure of plaintiff’s untimely expert report. “Had Defendants felt genuinely prejudiced, they had ample opportunity to move for preclusion.” Id. at 49.

Lesser Sanctions Imposed Despite Lying in Wait

The foregoing cases support the proposition that, in the Second Circuit, a party will be denied preclusive sanctions if it lies in wait before moving under Rule 37(c)(1). However, there is surprising support for the additional conclusion that even when the movant lies in wait, non-preclusive sanctions remain available under Rule 37(c)(1). For example, in Lee Valley Tools, supra, the plaintiff violated Rule 26 by failing to produce financial information related to damages during the discovery period and the court found that the violation was not harmless. The court denied the defendant’s motion to preclude because the defendant failed to mitigate the prejudice and knowingly sat on its rights to gain an unfair tactical advantage. 288 F.R.D. at 262 (“Instead of challenging the deficiency, [defendant] remained silent”). Nevertheless, the court reopened discovery, permitted supplemental expert reports, and ordered plaintiff to pay defendant’s expert fees and costs resulting from the additional discovery and supplemental reports. Id. Similarly, in Stephen v. Hanley, No. 03-CV-6226(KAM)(LB), 2009 U.S. Dist. LEXIS 42779, at *17 (E.D.N.Y. May 20, 2009), the court found that defendants’ late disclosure of its expert witness’s testifying history and compensation violated Rule 26 but the violation was harmless in part because plaintiffs waited to notify the court of the defendants’ noncompliance. The court stated, “Plaintiffs’ own conduct in this regard is relevant to determining the harm—or lack thereof—allegedly suffered by the plaintiffs as a result of defendants’ noncompliance with Rule 26(a)(2).” Despite plaintiffs’ delay, however, the court ordered the expert witness’s deposition reopened at defendants’ expense.

Conclusion

Where a party has failed to disclose information required under Rules 26(a) or (e), an order precluding the party from introducing evidence at trial may be an appropriate sanction under Rule 37(c)(1). But preclusion is not automatic. Courts in the Second Circuit are likely to deny a motion to preclude where the movant has waited silently until discovery closes to raise the nondisclosure. This outcome is consistent with the goal of preventing parties from using Rule 37(c)(1) to take unfair advantage of an adversary. However, courts may be willing to impose non-preclusive sanctions under Rule 37(c)(1) even when a party lies in wait before making the motion.

Endnotes:

[1] “If a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless. In addition to or instead of this sanction, the court, on motion and after giving an opportunity to be heard:

(A) may order payment of the reasonable expenses, including attorney’s fees, caused by the failure;

(B) may inform the jury of the party’s failure; and

(C) may impose other appropriate sanctions, including any of the orders listed in Rule 37(b)(2)(A)(i)—(vi).”

[2] Not all federal circuits have reached the same conclusion. See, e.g., Silver State Broad. v. Bergner, No. 16-16753, 2017 U.S. App. LEXIS 24767, at *3 (9th Cir. Dec. 7, 2017) (describing the exclusion sanction as “automatic”).

[3] These sanctions are: directing that matters be taken as established for purposes of the action; “prohibiting the disobedient party from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence;” striking pleadings; staying further proceedings until the order is obeyed; dismissal; or default judgment.

Samuel N. Fraidin is counsel and Peter R. Jerdee is a partner with Joseph Hage Aaronson LLC.