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Federal Court Examines Sanctions For Failing To Produce Documents Timely

Evonik Degussa GMBH v. Materia, Inc.
Case No. 09-636 (United States District Court for the District of Delaware, December 14, 2016)

by Richard J. Medoff, Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at:
http://www.ded.uscourts.gov/sites/default/files/opinions/nlh/2016/december/09-636.pdf

Evonik Degussa GMBH v. Materia, Inc. involved a Plaintiff’s pre-trial motion for sanctions for a Defendant’s production of certain documents only after the applicable deadline for production. After hearing oral argument on the Plaintiff’s motion, the Magistrate Judge assigned to oversee pretrial matters in the case issued an order granting the motion in part and awarding the Plaintiff the attorneys’ fees it incurred due to the late production, pursuant to Fed. R. Civ. P. 26. The Plaintiff appealed the Magistrate Judge’s ruling, arguing that the sanction imposed by the Magistrate Judge was too lenient and that the Plaintiff was entitled to additional relief, including an adverse inference jury instruction. On appeal, the U.S. District Court for the District of Delaware concluded that the Magistrate Judge’s decision was not clearly erroneous, and thus, the Court affirmed the Magistrate Judge’s order in its entirety.

By way of factual background, during the pre-trial stage of an ongoing civil case, Plaintiff Evonik Degussa GMBH (“Evonik” or “Plaintiff”) filed a “Motion for Sanctions and Relief Due to Spoliation,” alleging that Defendant Materia, Inc. (“Materia” or “Defendant”) and its attorneys acted in bad faith by deliberately withholding relevant and discoverable documents until after the deadline to produce the documents. On May 20, 2016, Magistrate Judge Schneider, who was assigned to oversee pretrial matters in the case, heard oral argument on Evonik’s motion and issued an order sanctioning Materia for belatedly producing one (1) particular email and other documents. In his oral opinion, Judge Schneider rejected Evonik’s assertions that Materia or its attorneys acted in bad faith, and stated that he did not believe “that defense counsel deliberately withheld a relevant document, defense counsel manipulated their firm’s computer system to remove the subject e-mail, and… Plaintiff’s conspiracy theory was simply too farfetched to credit.” Judge Schneider concluded, however, “that while not done in bad faith, Materia’s discovery conduct with regard to the specific issues presented in the motion did leave a lot to be desired.” Judge Schneider observed that “Materia should have, on more than one (1) occasion, reviewed its production for completeness, and did not.” Accordingly, Judge Schneider held that Materia violated Fed. R. Civ. P. 26(g), and awarded Evonik the attorneys’ fees it incurred due to the late production and allowed Evonik additional discovery.

Evonik subsequently appealed Magistrate Judge Schneider’s May 20, 2016, order granting in part, and denying in part, Evonik’s motion. Evonik disagreed with Judge Schneider regarding the seriousness of Materia’s failure, and argued that the sanction imposed was too lenient. Specifically, Evonik argued on appeal that Judge Schneider should have ruled that: (a) the belatedly produced documents could not be used by Materia at trial, and (b) Evonik was entitled to an adverse inference jury instruction.

The Court began its analysis by noting that a “district court judge will only reverse a magistrate judge’s decision on pretrial matters if it is ‘clearly erroneous or contrary to law.’” See 28 U.S.C. § 636(b)(1)(A); Fed. R. Civ. P. 72(a). Evonik asserted that Magistrate Judge Schneider had made three (3) specific errors, which the Court addressed in turn.

First, Evonik asserted that Judge Schneider “converted Evonik’s spoliation motion into a discovery motion under Rule 37,” and then argued “that Rule 37 requires, as opposed to permits, the Court to preclude Materia from relying on the belatedly-produced documents at trial.” The Court, however, rejected Evonik’s argument. The Court found that there was “no basis in the record for concluding that Judge Schneider ‘converted’ the motion.” To the contrary, the Court concluded that Judge Schneider “rejected Evonik’s spoliation argument because spoliation requires a finding of bad faith, and then very clearly imposed sanctions pursuant to Fed. R. Civ. P. 26, not Fed. R. Civ. P. 37.”

Second, Evonik asserted that Judge Schneider “erred when he stated that a subpoena is not a Court order.” The Court, however, found that this argument failed because, “even assuming arguendo that Judge Schneider misstated the law as to this discreet issue, such conclusion was not integral to Judge Schneider’s decision.” The Court explained that “even if Materia did violate a subpoena/court order” when it failed to  produce all responsive documents timely, “the fundamental point remained that Judge Schneider found that the violation was not willful, nor in bad faith, but rather inadvertent.”

Finally, Evonik reasserted the argument that it made before Judge Schneider that “Materia’s conduct evidenced bad faith.” The Court noted that Judge Schneider had “addressed this argument, considered all of the record evidence, and concluded that there was insufficient evidence to support Evonik’s ‘conspiracy theory.’” The Court concluded that Judge Schneider’s findings on this issue were not clearly erroneous. For the foregoing reasons, the Court affirmed Magistrate Judge Schneider’s May 20, 2016, order in its entirety.


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