Sanctions levied after discovery violations

A party’s discovery delays resulted in a default judgment and an award of more than $80,000 in compensatory and punitive damages to its opponent.

On appeal, the sanctioned party argued that the harsh sanctions were an abuse of discretion because they responded to discovery — albeit more than 200 days late — and their opponent wasn’t prejudiced by the delay.

The Court of Appeals of Virginia wasn’t persuaded.

“A trial court may conclude that the lack of prejudice warrants a lesser sanction than the striking of a pleading or the entry of a default judgment. For instance, an award of attorney fees may be appropriate ‘[i]n lieu of’ such a sanction,” Judge Stuart A. Raphael wrote. “But our Supreme Court has never required that prejudice must be shown before the most severe sanctions may be imposed for disobeying a discovery order.”

Judges Clifford L. Athey Jr. and Vernida R. Chaney joined Raphael’s opinion in Pine Hill Group v. Nass Group (VLW 023-7-002).

Sanctions

Nass Group rented commercial space from Pine Hill Group under a written two-year lease that was orally renewed for another two-year term. Although it paid several months’ rent at the beginning of the new term, Nass said Pine Hill changed the locks anyway.

Nass sued Pine Hill for breach of contract, conspiracy and conversion of their equipment and inventory. Pine Hill’s attorney filed an answer denying liability. Nass served discovery in June 2021; Pine Hill didn’t respond.

Instead, Pine Hill’s attorney moved to withdraw when the discovery responses were 40 days overdue. Three weeks later, Nass moved to compel discovery.

The judge allowed Pine Hill’s attorney to withdraw. Pine Hill was given 10 days to send discovery responses that were now 92 days late.

But the judge struck language from Nass’s proposed order that default would automatically be entered against Pine Hill if they violated the order. The deletion was “without prejudice” to future relief.

Again, Pine Hill didn’t respond. This time, Nass moved for sanctions.

In November 2021, the judge struck Pine Hill’s answer, entered default judgment against them on liability and scheduled a damages hearing. At this point, the responses were 120 days overdue.

Pine Hill retained counsel who moved for reconsideration of the sanctions order in February 2022. Pine Hill claimed it sent discovery responses weeks earlier and that Nass would suffer minimal prejudice if the default were withdrawn. It also asserted that the unwritten lease extension was invalid.

Pine Hill also said it was unaware that its attorney moved to withdraw until days before the November hearing. Rather than bad faith, Pine Hill said its discovery failures were a genuine misunderstanding by a representative who wasn’t proficient in English and didn’t understand the U.S. legal system.

The judge refused to reconsider the sanctions. In March 2022, the judge awarded Nass compensatory damages of $60,190.92 and punitive damages of $20,000.

Pine Hill appealed.

No relief

Supreme Court Rule 4:12 addresses how to enforce discovery orders and provides that a court may strike pleadings or render a default judgment against a party who disobeys a discovery order or fails to respond to discovery.

“The Supreme Court of Virginia held in 2000 ‘that Rule 4:12(d), when read with the other provisions in Rule 4:12, authorizes a circuit court to dismiss [a pleading] only when the [disobedient party] fails to comply with a court’s order to provide or permit discovery,” Raphael wrote. “The Court acknowledged that its interpretation of Rule 4:12(d) conflicted with how most federal courts had construed the identically worded language of Rule 37(d) of the Federal Rules of Civil Procedure. It noted, however, that ‘federal courts’ interpretations of their rules’ were only ‘informative, … not binding on this Court’s interpretation of our Rules.’”

But the Supreme Court amended that rule in 2018 and “clarified that if a party completely fails to respond to discovery, the trial court can impose the severe sanctions available … even ‘without prior entry of a Rule 4:12(b) order to compel,’” Raphael noted.

Here, Nass could have demanded more severe sanctions against Pine Hill and it didn’t object to having its automatic default language removed. Further, Pine Hill’s attorney endorsed that the deletion was “without prejudice” before withdrawing from the case.

Also, Raphael pointed out, discovery responses were 209 days overdue by the time Pine Hill retained new counsel and responded to interrogatories and document requests.

“We disagree with Pine Hill that a trial court abuses its discretion if it imposes a default judgment as a discovery sanction when the opposing party has not been prejudiced by the delay,” he wrote.

The court then declined Pine Hill’s request to contextually apply a different rule that allows relief from default for good cause if the defendant moves for relief before the court enters the default judgment.

“The failure to file a responsive pleading by the deadline imposed by court rules is different in kind from disobeying a court order compelling discovery, entered after the disobedient party has already violated a deadline imposed by court rules,” he wrote. “Rule 4:12 contains no similar ‘for good cause shown’ language and, as just explained, our Supreme Court has squarely rejected claims that the movant must show prejudice before the court enters the severest discovery sanctions.”

Raphael acknowledged that a trial court’s sanction authority has limits.

“But the circuit court here could properly find that Pine Hill failed to justify its failure to respond to Nass’s discovery requests, particularly during the months in which Pine Hill was represented by its original counsel,” he pointed out. “The circuit court also did not act precipitously or without warning. Under the 2018 amendment to Rule 4:12(d), the court could have struck Pine Hill’s answer and entered a default judgment as a sanction for not responding to Nass’s discovery requests.”

Rather than enter default immediately, the trial court ordered that Pine Hill respond to discovery within 10 days and declined Nass’s automatic default language.

“It was only after Pine Hill missed that deadline and Nass moved for default judgment that the circuit court granted that relief as a sanction under Rule 4:12(b)(2),” Raphael wrote.

There was no abuse of discretion by the lower court when it refused to reconsider the default judgment entered against Pine Hill as a discovery sanction for disobeying the court’s order compelling discovery.

‘Cascade of errors’

John Chapman “Chap” Petersen said Pine Hill called his Fairfax office for representation after default had been entered. He told Virginia Lawyers Weekly it came down to whether the trial court had discretion under Rule 4:12.

“Given that default was the equivalent of the death penalty, I argued that there had to be some showing of prejudice and asked the court to import some type of standard,” he said. “Obviously, they declined and just said ‘proper discretion’, which was very harsh. Usually, you have all kinds of discovery controls and dates, but there was no scheduling order in place yet.”

Petersen added that “it’s just one of those things where you get a client that didn’t hire counsel when there was an order compelling discovery, didn’t do anything and then showed up to their default hearing without counsel. It was a cascade of errors.”

Jerome Friedlander II of Friedlander & Friedlander in McLean represented Nass Group from the start of litigation.

The harsh sanctions “certainly weren’t the fault of the lawyers as much as the fault of the clients for not listening to their lawyers,” he noted. “And of course, that’s the bane of our existence, isn’t it?”

He added that “by the time Chap tendered Pine Hill’s discovery responses along with a motion for reconsideration, they’d already received the biggest strike against them.”

Friedlander noted that the judge said there was “no evidence other than attorney representations as to what explanation may exist. There probably wasn’t an explanation and Chap’s not going to make something up, so they did the best they could with what the client was giving them, which was nothing.”

Damages could have been worse for Pine Hill.

“We originally asked for $65,715 but the judge didn’t give us lost income for the remaining seven months of the lease,” Friedlander said.