Free Motion for Sanctions - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Case No. 01-cv-02199-MSK-MEH MICHAEL E. CLAWSON and JARED L. DILLON, Plaintiffs, v. MOUNTAIN COAL COMPANY, L.L.C., ARCH WESTERN RESOURCES, L.L.C., and ARCH COAL, INC., Defendants.

PLAINTIFFS' MOTION FOR FED. R. CIV. P. 37(c) SANCTIONS FOR FAILURE TO SUPPLEMENT DISCOVERY REQUESTS REGARDING THE NUMBER OF DEFENDANTS' EMPLOYEES

The plaintiffs, Michael E. Clawson and Jared L. Dillon, through their undersigned counsel, Killian, Guthro & Jensen, P.C., hereby submit their Motion For Fed. R. Civ. P. 37(c) Sanctions For Failure To Supplement Discovery Requests Regarding The Number Of Defendants' Employees, and in support thereof, state as follows: Certificate of Conferral Pursuant to D.C.COLO.LCivR 7.1 Plaintiffs' counsel conferred with defense counsel on March 7, 2007, and defense counsel informed plaintiffs' counsel that defendants object to the relief requested in this motion. I. BACKGROUND A. Facts Leading to the Current Motion

The jury returned a verdict in this case on April 21, 2006. That verdict included an award

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of compensatory damages to plaintiff Clawson in the amount of $250,000. The jury also determined that Arch Coal, Arch Western Resources, and Mountain Coal constituted an integrated enterprise. Whether Clawson's compensatory damages may stand, or must be reduced to $200,000, depends on whether the defendants collectively employed 501 or more employees. On May 11, 2006, defendants filed a motion seeking to reduce the compensatory damages award based upon the premise that the defendants collectively employed fewer than 501 employees. (Docket No. 423). The motion relied upon the affidavit of a witness who had never been disclosed pursuant to Fed. R. Civ. P. 26(a)(1)(A). The witness relied upon documents, from the Oracle computer system, which were never disclosed pursuant to Fed. R. Civ. P. 26(a)(1)(B). Plaintiffs' response objected to the submission or consideration of such evidence under Fed. R. Civ. P. 37(c) because it was not disclosed. (Docket No. 435). The only documents or information plaintiffs had received regarding the number of employees were the EEO-1 reports. Defendants' reply indicated that plaintiffs never should have relied upon the EEO-1 reports because defendants had indicated their own belief that the EEO-1 forms were not entirely accurate. (Docket No. 441, p.2). Defendants stated that they never intended to rely on the EEO-1 reports, and knowing this, plaintiffs should have conducted additional discovery.1 (Docket No. 441, p.2). Defendants asserted that plaintiffs had not shown any interest in discovery on the number of employees beyond the EEO-1 documents, and that plaintiffs had no basis to rely on the EEO-1 reports instead of conducting additional discovery. (Docket No. 441, p.2-4).
It is a mystery to plaintiffs how defendants' intent not to rely on documents submitted in response to discovery somehow relieves them of the burden of disclosing the documents they do intend to rely on. Fed. R. Civ. P. 26(a)(1)(B).
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On January 24, 2007, this court issued an order ruling on several motions. As part of that order, the court set a hearing for March 27, 2007, regarding the number of employees. Additionally, the court overruled plaintiffs' objection, thus, allowing consideration of evidence which was not disclosed pursuant to Fed. R. Civ. P. 26(a)(1). (Order January 24, 2007, p.28 FN 18). The order stated: "The parties had ample opportunity to anticipate factual disputes over this issue prior to trial and to conduct appropriate discovery at that time." (Order January 24, 2007, p. 28 FN 18). Clawson understands this order as adopting defendants' reasoning that he should have conducted discovery on the issue of the number of employees rather than relying on defendants to comply with the disclosure rules. However, plaintiffs did submit discovery requests on the number of employees, and the only information provided was the EEO-1 forms and responses referring the plaintiffs to these forms. B. Facts Related to Discovery and Defendants' Failure to Supplement

This case was originally brought solely against Mountain Coal. However, plaintiffs sought to add Arch Coal and Arch Western Resources as parties. (Motion of August 16, 2002). Although this was after the deadline for amending pleadings, plaintiffs sought the amendment because Mountain Coal had not made its required D.C.COLO.CivR 7.4 disclosure of parent companies. Additionally, Mountain Coal had inadequately responded to interrogatories and requests for production regarding its corporate family, claiming it had none. The District Court Judge ultimately overruled the Magistrate Judge and allowed Arch Coal and Arch Western Resources to be added, largely due to Mountain Coal's failure to correct its disclosures and discovery responses. (Order of December 2, 2002). This made Arch Coal and Arch Western Resources parties as of December 2, 2002, with the full responsibility to respond to, and 3

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supplement, discovery. Thus, any outstanding discovery request directed to "defendant" had to be supplemented if it was no longer correct or complete based upon the addition of these two parties. On April 18, 2002, plaintiffs submitted their first set of interrogatories and first set or requests for production to the defendant, which at that time was only Mountain Coal. The relevant requests were not addressed specifically to Mountain Coal, but to the "defendant" generically. On May 21, 2002, Mountain Coal responded. Request for Production 12 read, and was responded to, as follows: Request No. 12: Please produce a copy of each Employer Information Report EEO-1 form for the years 1997 to the present filed on behalf of the defendant's organization, and any subpart or attachments thereto. Response to Request No. 12: Defendant objects to Request No. 12 on the grounds that it is overly broad, and vague and ambiguous with respect to the term "defendant's organization." Notwithstanding this objection, and without prejudice thereto, Defendant will produce its EEO-1 reports for the years 1998 through 2001. Request for Production number 29 read, and was responded to, as follows: Request No. 29: Please produce any documentation evidencing the number of the defendant's employees in the United States and, specifically, the number of employees in Colorado, and at the specific Colorado locations in 1998, 1999, 2000, 2001, and 2002. Response to Request No. 29: Defendant objects to Request No. 29 on the grounds that it is overly broad, unduly burdensome, and vague and ambiguous with respect to the term "specific Colorado locations." Notwithstanding this objection, and without prejudice thereto, Defendant refers Plaintiffs to the EEO-1 reports produced in response to Request No. 12. It is clear by the use of the term "any documentation" plaintiffs were not seeking one piece of evidence, but any documentary evidence, regarding the number of employees. This naturally 4

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would have included the Oracle program that was not revealed until 2006. According to the Eastwood affidavit, the Oracle system was in effect since 1998. (Exhibit 1). Further, by only referring plaintiffs back to the EEO-1 reports, Mountain Coal was indicating that the EEO-1 reports were the only documents "evidencing the number of the defendant's employees in the United States . . . ." Finally, interrogatory number 37 read, and was responded to, as follows: INTERROGATORY NO. 37: Please identify the number of defendant's employees in the United States and, specifically, identify the number of employees in Colorado, and at the specific Colorado locations. ANSWER TO INTERROGATORY NO. 37: Defendant objects to Interrogatory No. 37 on the grounds that it is vague and ambiguous with respect to the term "specific Colorado locations." Notwithstanding these objections, and without prejudice thereto, Defendant states that, pursuant to Fed. R. Civ. P. 33(d), the answer to Interrogatory No. 37 may be ascertained by Plaintiffs from a review of Defendant's records and specifically refers Plaintiffs to the EEO-1 reports produced in response to Request for Production No. 12. Interrogatory 37 does not ask for documents, but specifically ask for the number of employees. While it is appropriate in some circumstances to refer the opposing party to documents to answer an interrogatory, the documents must accurately answer the question asked. Defendants' failure to supplement this interrogatory answer left the impression that the EEO-1 reports accurately recorded the number of employees, and that there were no documents that were more accurate. Mountain Coal supplemented the responses to both interrogatories and requests for production on July 24, 2002. However, the answers to requests 12 and 29 as well as interrogatory 37 remained the same. Mountain Coal supplemented the responses again on September 26, 2002. The response to interrogatory 37 and request for production 29 remained 5

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the same. The response to request number 12 was amended to add the following language, "Defendant does not have a copy of its EEO-1 form for 1997 as such forms must be maintained for only two filing periods." On January 13, 2003, after Arch Coal and Arch Western Resources were added, discovery responses were again supplemented. The answer to interrogatory 37 was not supplemented or amended. Neither request for production 12 nor request for production 29 were supplemented or amended at this time. Defendants' failure to supplement for Arch Coal and Arch Western Resources was in violation of the Fed. R. Civ. P. 26(e)(2) requirement to supplement discovery responses when a party learns that the responses are incomplete or incorrect. With the addition of Arch Coal and Arch Western Resources, at least the response to request 12 was incomplete. Interrogatory responses were again supplemented on January 27, 2003, but the answer to interrogatory 37 was not altered. On March 4, 2003, both interrogatories and requests for production were supplemented. No change was made in the answer to interrogatory 37. Likewise, neither request for production 12 nor request for production 29 were supplemented or amended. Defendants supplemented the response to request for production number 12 on December 31, 2004, stating, "Defendants supplement their prior production with EEO-1 reports for 2003 and 2004." The only documents attached are the EEO-1 reports for Mountain Coal for 2003 and 2004. Defendants supplemented the response to interrogatory number 7 on March 1, 2005, but not interrogatory number 37. While defendants did provide the EEO-1 reports for Arch Coal and Arch Western

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Resources, they did not provide them as a supplement or amendment to discovery.2 However, defendants did not supplement request number 29 asking for "any documentation" of the number of employees. This request required production of the Oracle program and related documents defendants now claim is evidence of the number of employees. Likewise, interrogatory 39 required defendants provided a supplementary answer regarding the number of employees for Arch Coal and Arch Western Resources. If the EEO-1 documents did not give a complete or accurate response to interrogatory 39, defendants were required to supplement their answer by providing the number of employees or appropriately referring plaintiffs to the correct documents. The above history demonstrates that plaintiffs did conduct discovery on the subject of the number of employees, but defendants did not appropriately respond to, or supplement, such discovery, leading to their motion ambushing plaintiffs with the Oracle documents. II. LEGAL STANDARD A. Relevant General Rules Regarding Discovery

"Mutual knowledge of all the relevant facts gathered by both parties is essential to proper litigation. To that end, either party may compel the other to disgorge whatever facts he has in his possession." Klonoski v. Mahlab, 156 F.3d 255, 268 (1st Cir. 1998) quoting Hickman v. Taylor, 329 U.S. 495, 507 (1947). "The purpose of the discovery rules is to provide for the `fullest possible' pretrial disclosure of admissible evidence, to `reduce the possibility of surprise,' Hickman, 329 U.S. at 500-01, and to insure `a fair contest,' Proctor & Gamble, 356 U.S. at 682." Klonski, 156 F.3d at 271.

This is not itself a violation as request for production need not be supplemented if the document is otherwise provided. Fed. R. Civ. P. 26(e)(2).

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Clawson, as the part challenging the discovery response, bears the burden of demonstrating that the discovery response was inadequate or incomplete. Continental Ins. Co. v. McGraw, 110 F.R.D. 679, 681 (D. Colo. 1986). Generally, discovery on damages should be conducted at the same time as discovery on liability.3 Kodekey Electronics, Inc. v. Mechanex Corp., 486 F.2d 448, 457-458 & FN 10 (10th Cir. 1973). "A party cannot generally answer an interrogatory . . . by producing documents." Mackey v. IBP, Inc., 167 F.R.D. 186, 198 (D. Kan. 1996). A specific section of the rules allows production of documents to answer an interrogatory in limited circumstances. Fed. R. Civ. P. 33(d). When an interrogatory response refers the opposing party to documents, is must be to specific documents answering the question. Continental Ill. Nat'l Bank & Trust Co. v. Caton, 136 F.R.D. 682, 686-87 (D. Kan. 1991). In order to justify using documents instead of answering the question, the producing party "must show that a review of the documents will actually reveal answers to the interrogatories." Securities and Exchange Comm'n v. Elfindepan, S.A., 206 F.R.D. 574, 576 (M.D. N.C. 2002). "In other words, the producing party must show that the named documents contain all of the information requested by the interrogatories." S.E.C., 206 F.R.D. at 576 (emphasis added). B. Specific Rules Regarding Supplementation

Answer interrogatories and request for production does not end the responding parties duty, because the rules contain a duty of supplementation for discovery responses. Fed. R. Civ. P. 26(e)(2). A party "has a continuing duty to supplement his disclosures upon learning that the information he disclosed in his interrogatories was incomplete." Rodriguez v. IBP, Inc., 243 F.3d
Although this motion is principally addressed to the effect the number of employees has on damages, the existence of a computer program at Arch Coal keeping track of all employees at its subsidiaries would have been relevant to the integrated enterprise issue at trial.
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1221, 1229 (10th Cir. 2001). "The obligation to supplement disclosures and discovery responses applies whenever a party learns that its prior disclosures or responses are in some material respect incomplete or incorrect." 1993 Advisory Cmt Comment to Rule 26 Subdivision (e). Rule 26(e) imposes a broad requirement for parties to update earlier disclosures and discovery. Klonski v. Mahlab, 156 F.3d 255, 268 (1st Cir. 1998). "[T]he rule requires prompt supplementation of its [the party's] additional materials so the opposing party is not mislead by original discovery responses as the opposing party prepares its case for trial." Klonski, 156 F.3d at 268. Inadvertence or lack of intent do not excuse a failure to supplement disclosures or discovery. Rodriguez v. IBP, Inc., 243 F.3d 1221, 1229 (10th Cir. 2001). "A party that without substantial justification fails to . . . amend a prior response to discovery as required by Rule 26(e)(2), is not, unless such failure is harmless, permitted to use as evidence at trial, at a hearing, or on a motion, any witness or information not so disclosed. Fed. R. Civ. P. 37(c)(1) (emphasis added). Failure to comply with the supplementation provisions of rule 26(e)(2) was specifically added to rule 37(c)(1) as a grounds for excluding evidence withheld by a party. 2000 Advisory Cmt. Comments to Rule 37 subdivision (c)(1). Exclusion of evidence is a "self-executing sanction" that does not require a motion to compel. 1993 Advisory Cmt. Comments to Rule 37 subdivision (c). "The required sanction in the ordinary case [of failure to supplement] is mandatory preclusion." Klonski, 156 F.3d at 269. C. Cases Applying These Rules

These rules were applied by the United States District Court for the District of Maine to excluded witnesses from trial because the plaintiff failed to supplement interrogatory answers. Roger Edwards, LLC v. Fiddes & Sons, LTD, 216 F.R.D. 18 (D. Maine 2003). The defendant 9

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had submitted an interrogatory asking for the names and addresses of all persons having knowledge of the claims or counter claims. Id. at 19. Plaintiff, just prior to trial, identified numerous witnesses in its witness list that had not been previously disclosed. Id. Plaintiff asserted it was unaware of the witnesses until two months prior to trial. Id. at 20. The court excluded the witnesses because the plaintiff failed to update its discovery responses or disclosures. Id. at 20. Likewise, the United States District Court for the Southern District of Texas excluded portions of an affidavit from consideration in ruling on a summary judgment motion. W.G. Pettigrew Distrib. Co. v. Borden, Inc., 976 F.Supp. 1043, 1051-52 (S.D. Tex. 1996). The information in the portions of the affidavit that were excluded should have been provided to the opposing party in a supplement to discovery responses, and thus was excluded under rule 37. Id. III. APPLICATION OF THE DISCOVERY RULES TO THIS CASE Clawson has met his burden of demonstrating that the responses to request for production 29 and interrogatory 37 were incomplete or inaccurate. The responses to both requests simply incorporate the EEO-1 reports provided by defendants. Request for production 29 asked for "any documentation" evidencing the number of employees. The Eastwood affidavit demonstrates that the EEO-1 reports were not the only documentation. (Exhibit 1). The response to interrogatory 37 could incorporate the EEO-1 reports only if they gave a complete answer providing all of the information requested. If the Eastwood affidavit is correct, once Arch Coal and Arch Western Resources were added, only referring to the EEO-1 reports in response to interrogatory 37 no longer complied with rule 33(d). Additional information had to be provided to make defendants' answer complete in compliance with rule 26(c). 10

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The Eastwood affidavit shows that defendants failed to supplement their responses upon learning that the answers were incomplete. Once Arch Coal and Arch Western Resources were added, defendants had to supplement their answers to the extent they were no longer complete. Fed. R. Civ. P. 26(e)(2). The Eastwood affidavit and the claim that the EEO-1 reports are not accurate show that defendants' responses were incomplete. Therefore, exclusion of any evidence derived from the Oracle system, and any testimony based thereon, is required unless defendants can show that their failure was substantially justified or harmless. Jacobson v. Deseret Book Co., 287 F.3d 936, 953 (10th Cir. 2002); Sender v. Mann, 225 F.R.D. 645, 655 (D. Colo. 2004). Due to the fact that defendants did not reveal this information until after the verdict, despite having the Oracle system in place since 1998, defendants cannot make either showing. The party responding to discovery is in the unique position of knowing whether its discovery responses have become incomplete or inaccurate. The party seeking discovery is unlikely to know whether previously provided answers have become, or were, incomplete or inaccurate due to changes in circumstances or information available. For this reason a responding party has a duty to supplement regardless of whether a request is made or a motion is filed. See Rodriquez, 243 F.3d at 1229 (While the party that sought relevant information through discovery could have been more aggressive in seeking it, such actions were not required in order to obtain sanctions for failure to supplement discovery). While plaintiffs were not required to ask for supplementation on the number of employees, plaintiffs did make such a request by letter. (Exhibit 2, Letter of March 28, 2003). The letter seeks supplementation of request for production 12 with EEO-1 reports from Arch Coal and Arch Western Resources. The letter does not requests supplementation of request for 11

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production 29 or interrogatory 37. However, plaintiffs were unaware that these requests required supplementation, because they only incorporated the EEO-1 reports provided in response to request for production 12. As far as plaintiffs knew, supplementing request 12 would result in supplementation of request for production 29 and interrogatory 37. Defendants were aware that plaintiffs were seeking information on the number of employees, and that providing the EEO-1 reports left the responses to request 29 and interrogatory 37 incomplete. This is shown by the Pat Madras affidavit that states that the EEO-1 forms do not necessarily accurately reflect the number of employees. (Exhibit 3, Pat Madras affidavit). It is also shown by the statement in defendants' own reply that Madras could have provided the testimony regarding the Oracle system. (Docket No. 441, p.3 FN 1). The affidavit and reply demonstrate that at the time defendants produced the EEO-1 reports in response to plaintiffs' letter, defendants knew plaintiffs were seeking information on the number of employees and that the supplementation provided was incomplete. Defendants are likely to make the somewhat absurd assertion that neither Arch Coal nor Arch Western Resources were required to provide information in response to the discovery requests. This would be consistent with defendants' pattern of hiding information about Arch Coal and Arch Western Resources. See Court Order of December 2, 2002 (allowing Sixth Amended Complaint in part because of failure to provide information regarding Arch Coal and Arch Western Resources). The argument would be based upon the fact that the discovery was served prior to Arch Coal and Arch Western Resources being added as parties. However, they, with Mountain Coal, were joint parties with a joint defense and had the same counsel. Of course, the discovery was appropriately served on their counsel. Fed. R. Civ. P. 5. Further, they were 12

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alleged, and found, to be a single integrated enterprise. None of the requests named, or were specific to, Mountain Coal. They were addressed to "defendant" generically. Although worded in the singular, they should have been interpreted as applying to any defendant on whom they were served. Any other interpretation exalts form over substance. Finally, even if Arch Coal and Arch Western Resources were not required to provide answers, Mountain Coal was required to supplement with the Oracle system as soon as it learned that the Oracle system contained information responsive to the requests. Defendants were required to supplement their discovery responses to prevent plaintiffs from being mislead by the original responses. See Klonski, 156 F.3d at 268. Defendants' responses lead plaintiffs to believe that the EEO-1 reports were the only documents evidencing the number of the defendants' employees. The court declined to exclude the evidence for failure to disclose because plaintiffs could have conducted additional discovery. However, plaintiffs attempted to conduct discovery on the issue, and were mislead by defendants' responses and the failure to supplement. Defendants' failure is neither harmless nor substantially justified. Exclusion is therefore required, whether the conduct was purposeful or unintentional. See Rodriguez v. IBP, Inc., 243 F.3d 1221, 1229 (10th Cir. 2001). Exclusion is the appropriate remedy not only as a matter of enforcement of the rules, but also to deter future conduct of this type. Klonski, 156 F.3d at 271, 273-274. Any other remedy, such as a continuance for additional discovery, will merely encourage such conduct on the grounds that even if the party is caught, the remedy will simply put the party in the same position it would have been had it complied with the rules to begin

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with. The court should exclude any evidence derived from the Oracle program as a sanction for defendants' discovery violations. CONCLUSION Defendants violated the discovery rules requiring supplementation of discovery responses that are, or become, incomplete or inaccurate. Defendants knew that their discovery requests were incomplete, yet did not supplement them. Defendants had the Oracle system in place since 1998, yet never provided the information contained therein in response to request for production 29. The only reasonable sanction is to exclude any evidence that was not provided in response to plaintiffs' discovery requests. This includes, but is not limited to, information derived from the Oracle system. The only information provided in response to discovery was the EEO-1 reports and the affidavit of Pat Madras. The evidence at the March 27, 2007, hearing should be limited to these documents. RESPECTFULLY SUBMITTED this 7th day of March, 2007.

s/Damon Davis J. Keith Killian Damon Davis Killian, Guthro & Jensen, P.C. 225 N. 5th Street Grand Junction, CO 81501 Telephone: (970) 241-0707 FAX: (970) 242-8375 E-mail: [email protected] Attorney for Plaintiffs Michael E. Clawson and Jared L. Dillon

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UNITED STATES DISTRICT COURT FOR THE DISTRIT OF COLORADO CERTIFICATE OF SERVICE (CM/ECF) I hereby certify that on March 7th, 2007, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send notification of such filing to the following e-mail addresses: [email protected] [email protected] and, I hereby certify that I have mailed or served the document or paper to the following non CM/ECF participants in the manner (mail, hand-delivery, etc.) indicated by the non-participant's name: Mr. Michael Clawson 38506 Back River Road Paonia, CO 81428 Mr. Jared Dillon 35404 Back River Road Hotchkiss, CO 81419 Mail

Mail

s/Damon Davis Damon Davis Attorney for Plaintiffs Killian, Guthro & Jensen, P.C. 225 N. 5th Street Grand Junction, CO 81501 Telephone: (970) 241-0707 Fax: (970) 242-8375 [email protected]

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