Discovery in a complex commercial case can feature its fair share of mayhem, particularly where it includes a large document production. Yet, where parties plan and execute information exchanges with reasonable diligence, the Business Court typically affords considerable latitude. That’s consistent with the ethic of the Court’s discovery rules – “designed for the parties to set expectations, with reasonable specificity, about what information each party seeks and about how that information will be retrieved and produced.” BCR 10.3.
Where a discovery dispute extends beyond the pre-filing dispute resolution mechanism in the Court’s rules (see BCR 10.9), a primary objective in Business Court dockets often is to present a narrative of reasonable, if ill-fated disputes. In Lunsford v. JBL Communications, LLC, 2021 NCBC 14, the Court called out an easy way to lose control of your own story: telling opposing parties and the Court what you think they want to hear, as opposed to the facts and discovery realities they need to appreciate. As Judge Conrad put it,
When the Court asks for counsel’s guidance, it expects probity, not propitiation.
In Lunsford, the Court noted that plaintiffs had “assured partial or complete production” on eight different dates over a four-month period, but conceded in later sanctions proceedings “they had no reasoned basis for assuring compliance by any of these dates.” At a hearing, plaintiffs’ counsel indicated they were “pie in the sky” dates that relied on “blind optimism.” Id. ¶ 33. The Court offered a more stark characterization, calling it an “unjustified lack of diligence” and “a lack of candor.” Id. ¶¶ 32-33.
It didn’t have to be that way. Parties that find themselves in deep discovery holes will sometimes find after abandoning the shovel that a ladder lies just beyond a substantial cloud of dirt. In Lunsford, the parties participated in the BCR 10.9 discovery dispute mechanism that includes submission of position summaries to the Court and a discretionary phone hearing. In considering responses “outstanding for at least five months and as many as nine months,” the Court pointed out the ladder and afforded instructions for climbing: serve the overdue responses, provide a date by which documents would be produced, and provide guidance about what documents plaintiff would produce, could not produce, or refused to produce. ¶ 8.
Continued digging ensued. A first sanctions motion resulted in the Court’s conclusion that plaintiffs “had not even begun to search for and retrieve information” from electronic sources that likely held responsive material, nor made determinations about how to preserve, identify and produce such information. Id. ¶¶ 10-11. The Court awarded a modest sanction of payment of expenses caused by plaintiffs’ noncompliance, and a new production deadline of 30 days to which plaintiffs did not object based on their retention of a vendor to assist with producing electronically stored information. Id. ¶ 12.
The aftermath brought four motions to extend the new deadline, but no production. Ten weeks distant from the sanctions order, plaintiffs’ counsel conceded “he had spent little time on document review and could not guarantee production by any date.” A week later, counsel indicated at a status conference his only step toward retention of a vendor to assist with the production “was to fill out an online contact form.” Id. ¶¶ 18-19. The Court later extended the case calendar by seven months to accommodate renewed production efforts, but at a hearing on a second sanctions motion plaintiffs indicated a 12-week review by its vendor had not yet commenced. Id. ¶¶ 22-23.
A “habitual failure to live up to their own estimates of the time needed to meet their discovery obligations” led to an evidence preclusion sanction that barred plaintiffs “from introducing evidence” to support their own claims and defenses, as well as to oppose defendant’s defenses and counterclaims. Id. ¶¶ 32, 34-35. The Court allowed reasonable expenses, including attorney’s fees, as a monetary sanction but declined requests to declare certain facts as established or to dismiss plaintiffs’ claims. The Business Court offered a host of evidence preclusion citations, but practitioners may wish to note in particular a Court of Appeals decision that affirmed evidence preclusion in response to evasive discovery conduct and failure to obey orders compelling discovery. See GE Betz, Inc. v. Conrad, 752 S.E.2d 634 (N.C. App. 2013).
The Court soberly observed that plaintiffs’ own, persistent digging “built a record of disobedience, disregard for the judicial process, and prejudice to their adversary.” Id. ¶ 38. For failure to acknowledge and avail themselves of a ladder to escape their discovery excavations, the Business Court decided that plaintiffs would sit in the hole for the duration of the case.
- The Business Court is likely to honor its ethic of reasonable and efficient discovery exchanges, even as problems arise, but when pushed will sanction parties that fail to right their ways – particularly after judicial invitation to do so.
- BCR 10.9 provides an avenue for efficient resolution of discovery disputes that can save time and a client’s money, but beware the Court’s recently expressed concern that overuse of this mechanism might lead to appointment of discovery referees for more complex disputes.
Brad Risinger is a partner in the Raleigh office of Fox Rothschild LLP.