The Complaint in this action was filed on March 9, 2006. Defendant First National Bank of Omaha (“FNBO”) filed its Answer on June 15, 2006. The parties filed a Joint Discovery Plan on October 15, 2006,
and the court entered a Scheduling Order on October 17, 2006. The Order provided a discovery deadline of May 4, 2007.
On August 17, 2007, the parties stipulated to the extension of discovery until October 8, 2007.
The process of discovery has been highly contentious. Plaintiffs filed a Motion to Compel on September 24, 2007 (Docket Entry No. 43), which was granted in part on October 11, 2007 (Docket Entry No. 62). Plaintiffs filed a Second Motion to Compel on March 30, 2008 (Docket Entry No. 63), which was granted in part on May 14, 2008 (Docket Entry No. 76–77). A Third Motion to Compel was filed on July 9, 2008 (Docket Entry No. 79), and taken under advisement following a hearing on July 31, 2008. Unable to secure Defendant's cooperation despite their several Motions to Compel, Plaintiffs filed a Motion for Sanctions on July 16, 2008 (Docket Entry No. 87). That motion set out in great detail the difficulties encountered in pursuing discovery from FNBO.
On September 5, 2008, I entered an Order Granting Plaintiffs' Third Motion to Compel Discovery as well as their Motion for Discovery Sanctions. Defendant FNBO was ordered to review every response to Plaintiffs' previous written discovery requests of October 2006; provide full, accurate and complete supplemental responses to each item which was incomplete or inaccurate; provide, for each request as to which no supplemental data was produced, a declaration under oath describing the measures taken to confirm the accuracy and completeness of the original response; and to produce all documents responsive to Plaintiff's requests in their entirety. Defendant's supplemental responses were to be served within twenty-one (21) days of the Order. In addition, Plaintiffs were afforded an additional period of 180 days to pursue discovery. The Order further provided that Defendant would pay Plaintiffs' reasonable attorney fees and costs, as a sanction for its failure to meaningfully participate in discovery.
On October 23, 2008, Plaintiffs filed yet another Motion to Compel and for Sanctions (Docket Entry No. 136). A Supplement Brief was filed on October 31, 2008 (Docket Entry No. 140). Defendant's Response was filed on November 7, 2008 (Docket Entry No. 142), and Plaintiffs' Reply on November 11, 2008 (Docket Entry No. 145). Following a hearing on November 20, 2008, the Motion was denied, but a Supplemental Order was entered to clarify Defendant's responsibilities under the September 5, 2008 Order as it pertained to Plaintiffs' Third Motion to Compel.
*2 On November 10, 2008, Plaintiffs filed a Motion to Compel Responses to Requests for Admissions and to Overrule Objections (Docket Entry No. 143). Defendant's Response was filed on November 28, 2008 (Docket Entry No. 150). The Motion was heard, and granted in part, on December 15, 2008.
On December 8, 2008, Plaintiffs filed another Motion to Compel (Docket Entry No. 153). On December 16, 2008, Plaintiffs filed a Renewed Motion to Compel and for Sanctions (Docket Entry No. 159). Both Motions were set for hearing on January 9, 2009. This Report and Recommendation is issued in connection with Plaintiffs' Renewed Motion to Compel and for Sanctions.
Plaintiffs have asserted claims arising under the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq. Discovery in a typical FCRA case centers largely on documents and evidence relating to policies and procedures employed in the handling of accounts. Once basic documents are identified and produced, depositions normally focus upon authenticating the written records and examining the formulation and implementation of credit reporting policies and procedures. Plaintiffs commenced discovery regarding their claims against FNBO with written Interrogatories and Requests for Production of Documents served in October 2006. Defendant filed written responses, many of which contained objections to form and/or content, while others elicited no objection. Plaintiffs efforts to follow-up on their initial discovery requests by way of depositions met with little success, chiefly because of Defendant's woefully inadequate attention to its responsibilities under the discovery rules, and the lack of cooperation by its counsel in addressing and adjusting shortcomings. Three Motions to Compel Discovery (Docket Entries 43, 63 and 79) were all found to warrant at least partial relief. Nonetheless, Defendant's compliance with its discovery obligations continue to be substandard.
Plaintiffs' July 18, 2008 Motion for Sanctions Under Rules 37 and 26 (Docket Entry No. 87) provided extensive and detailed information demonstrating that FNBO had: (a) purposefully withheld information; (b) intentionally misinformed the court and Plaintiffs' counsel; (c) delayed in disclosing key evidence; and (d) failed to comply with this court's Orders. I agreed with Plaintiffs' assertion that Defendant and its counsel had failed to make reasonable inquiry into matters addressed in discovery, and that they had attempted to frustrate Plaintiffs' discovery efforts.
*3 In my Order of September 5, 2008 (Docket Entry No. 126), I found that Defendant's Responses to Plaintiffs' written Interrogatories and Document Requests were incomplete and misleading, so as to: (a) omit the identities of material witnesses; (b) withhold relevant documents; and (c) conceal the existence and/or location of relevant data sources. I further found that, as a direct result of Defendant's failure to produce complete and accurate written responses, Plaintiffs' efforts to conduct meaningful depositions had been seriously undermined. The existence of witnesses and documentary evidence withheld in Defendant's written Responses was discovered by Plaintiffs in a piecemeal fashion, necessitating substantial expenditures of time, effort and money by Plaintiffs. I further found that Defendant had interposed improper and obstructive objections during deposition, failed to produce documents in the possession of defense counsel in a timely manner, despite their clear relevance, and that counsel for the Defendant had misled the court as to the reason for late production of documents and witness identities to which Plaintiffs were clearly entitled. Finally, I found that Defendant had failed to supplement its incomplete and misleading discovery disclosures, even after their inadequacy was exposed, and that Defendant further failed to identify and prepare a witness for deposition pursuant to Fed.R.Civ.P. 30(b)(6). I concluded that Defendant had been grossly negligent, if not wilful, in failing to meet its discovery obligations, and that sanctions were warranted.
My Order of September 5, 2008 stated the four factors which a court must consider in determining the appropriateness of dismissal or default as a consequence of discovery abuses. Those factors are:
1. Whether the party's failure to cooperate in discovery is due to wilfulness, bad faith or fault;
2. Whether the adversary was prejudiced by the defending party's failure to cooperate in discovery;
3. Whether the offending party was warned that failure to cooperate could lead to dismissal; and
4. Whether less dramatic sanctions were imposed or considered before dismissal was order.
Regional Refuse Systems, Inc. v. Inland Reclamation Co., 842 F .2nd 150, 155 (6th Cir.1988). I found three of the four factors satisfied, with the sole exception being a warning that failure to cooperate in discovery could lead to dismissal. In lieu of a recommendation for a default judgment, I ordered Defendant to review every response to Plaintiffs' written discovery requests of October 2006. I further ordered that Defendant provide full, accurate and complete supplemental responses to each item which was incomplete or inaccurate as then formulated. I directed the defense to provide, for each request as to which no supplemental data was produced, a declaration under oath describing the measures taken to confirm the accuracy and completeness of the original responses. Finally, Defendant was ordered to “[p]roduce all documents responsive to Plaintiffs' requests in their entirety.” Plaintiffs were granted an additional period of 120 days to complete their discovery. The September 5, 2008 Order ended with the following language:
*4 Defendant is hereby placed on notice that any significant violation of its obligation to respond in discovery from this time forward will result in a Report and Recommendation to the district judge that Defendant's Answer be stricken and that Default Judgment be rendered in favor of the Plaintiffs on the issue of liability.
September 5, 2008 Order, Docket Entry No. 126.
The Plaintiffs subsequently filed a Motion to Compel and for Sanctions (Docket Entry No. 136), relating to their July 9, 2008 Motion, which was also granted in the September 5, 2008 Order. At a hearing on November 20, 2008, I denied the Motion to Compel, based upon a lack of clarity in my Order with respect to the particular documents in issue. Defendant was not sanctioned, but a Supplemental Order directing Defendant to “promptly” produce certain documents to Plaintiffs was entered (Docket Entry No. 152). On December 8, 2008, Plaintiffs filed their seventh Motion to Compel (Docket Entry No. 153). On December 16, 2008, an eighth Motion, styled Renewed Motion to Compel and for Sanctions (Docket Entry No. 159), was filed by Plaintiffs. Both Motions were set for hearing on January 8, 2009. On that date, however, hearing of Plaintiffs' December 8, 2008 Motion (Docket Entry No. 153) was deferred, pending the court's disposition of this Report and Recommendation. The hearing proceeded on Plaintiffs' Renewed Motion to Compel and for Sanctions because it squarely addressed the issue of whether Defendant was guilty of a significant violation of its obligations to respond in discovery after September 5, 2008.
The instant Motion alleges several significant violations of Defendant's discovery obligations. Most of those are set out at length in Plaintiffs' Reply and Supplemental Brief of December 31, 2008 (Docket Entry No. 167). Plaintiffs' counsel did, however, present additional information at the January 9, 2009 hearing. Having reviewed Plaintiffs' Motion, together with Defendant's Response and Plaintiffs' Reply, and having heard the arguments of counsel, I find that Defendant has wilfully and substantially obstructed Plaintiffs' discovery efforts since my September 5, 2008 Order, in the following particulars:
*5 On December 15, 2008, counsel for both parties appeared for hearing on Plaintiffs' Motion to Compel Responses to Requests for Admissions (Docket Entry No. 143). During that appearance, Plaintiffs' attorney reported that the personnel evaluations, subscriber agreements and E–OSCAR documents had not been produced, and were necessary to his direct examination in a deposition scheduled for December 17, 2008, in Omaha, Nebraska.
Despite Plaintiffs' formal requests for production in October 2006, their Motion to Compel Production (Docket Entry No. 79), my September 5, 2008 Order Granting the Motion (Docket Entry No. 126), an extended discussion on the record on November 20, 2008, my direction from the bench that production was to occur within ten (10) days of a written Order, defense counsel's assurance that he would take action to secure his client's cooperation, my Supplemental Order of December 4, 2008 (Docket Entry No. 152) directing that production should be made “promptly,” and the notice of the scheduled December 17, 2008 deposition, counsel for FNBO claimed surprise at Plaintiffs' expressions of urgency. A discussion ensued, during which Plaintiffs' counsel explained that he would be required to depart for Omaha the following day. Thereupon, I ordered counsel for Defendant to return to his office and produce the documents on December 15, 2008 (i.e.“today”).
FNBO did not deliver the documents on December 15, 2008, as ordered. Accordingly, counsel for Plaintiffs drafted their Renewed Motion to Compel Supplemental Production of Documents and Issuance Sanctions (sic) Under Rule 37 and for Contempt of Court (Docket Entry No. 159). The Motion was filed electronically at 10:48 a.m. on December 16, 2008. Counsel for Plaintiffs left his office for the airport at 11:00 a.m. Forty-five (45) minutes later, counsel for Defendant initiated a tardy effort to produce the documents. They were e-mailed to Plaintiffs' counsel at 12:40 p.m., long after he had left his office.
In responding to Plaintiffs' Renewed Motion to Compel, counsel for FNBO asserted that he was instructed to serve the documents on December 16, 2008, and not on December 15, 2008. That response, while thoroughly predictable, is entirely untrue. Defendant's performance in this particular instance is consistent with its dilatory, obstructive and dishonest course of conduct throughout this litigation. Incredibly, however, it is neither the latest nor (arguably) the most serious breach of its discovery obligations since the September 5, 2008 Order.
As previously stated, discovery in a typical FCRA case centers largely upon documents and evidence relating to policies and procedures employed in the handling of accounts. The relevant documents are generally in the custody and control of the financial institution which administered the account. From the outset of Plaintiffs' discovery efforts, in October 2006, they have sought manuals describing Defendant's credit policies and procedures in force during the time period described in the Complaint. Throughout the course of discovery in this case, Defendant has consistently failed to produce a complete copy of the pertinent credit operations manuals, variously representing that only fragments of hard copies remain in existence; that the manuals were not maintained in electronic form; and that such manuals as did exist in electronic form had been updated in a manner which rendered the original text irrecoverable. Plaintiffs' efforts to secure these documents, and Defendant's repeated excuses for failure to produce them, were addressed at length in Plaintiffs' Third Motion to Compel (Docket Entry No. 79) and their July 18, 2008 Motion for Sanctions (Docket Entry No. 87). Defendant's repeated evasions and misstatements were addressed in the magistrate judge's Order of September 5, 2008. That Order, in addition to awarding Plaintiffs an additional 120 days of discovery, together with its attorney fees, specifically directed Defendant to review its responses to Plaintiffs' discovery requests, and to produce complete copies of requested documents. As noted above, Defendant was admonished that any significant failure to meet its discovery obligations would result in a recommendation that its Answer be stricken and that judgment be awarded to Plaintiffs on the issue of liability (Docket Entry No. 126).
*6 On or about October 1, 2008, Defendant purported to comply with the court's Order to supplement its discovery responses. Some additional documents were provided to Plaintiffs, but the credit operations manual for the period in issue was not among them. Rather, Defendant produced only the same ten page portion it had produced during depositions in May. In addition, it produced a current manual, much of which was not in force during the time of the Gamby's credit disputes. In reviewing that document, counsel for Plaintiffs discovered the existence of an April 2007 audit of FNBO's FCRA compliance procedures. The audit was performed by a Virginia company named Protoviti. Defendant having repeatedly denied that it could produce the manual in issue, Plaintiffs determined to seek relevant documents from Protoviti. Plaintiffs also issued a separate request for production to FNBO, seeking the documents Defendant had provided to Protoviti, in the hope that the request would trigger an effort by Defendant to secure relevant documents from its agent/contractor.
Defendant's repeated claims of inability to produce the long sought credit procedures manual were called into question by the sworn testimony of its own agent, Mr. Schomers, who stated that the requested documents did exist in electronic form. That testimony was relied upon by Plaintiffs in its October 23, 2008 Motion to Compel Supplemental Production of Documents (Docket Entry No. 136). In its response to that Motion (Docket Entry No. 142 at Page 6), and again at the hearing on November 11, 2008, Defendant's counsel persisted in the representation that the responsive document did not exist, Ms. Schomer's testimony notwithstanding. Plaintiffs' counsel sought access to Defendant's computer system as a means of challenging that representation. To my regret, I denied the request.
Plaintiff subsequently received a response from Protoviti to their Third Party Request for Production of Documents. Protoviti acknowledged possession of the documents sought, but refused to produce them based on their claim that the documents were in the possession of FNBO. Plaintiffs counsel was informed that the documents were jointly available to Protoviti and Defendant “over a shared electronic server of sorts” (Docket Entry No. 167, Plaintiffs' Brief, Page 10). Thereupon, Plaintiffs filed a Motion to Compel against Protoviti in the United States District Court for the Eastern District of Virginia (Case No. 08–MC–00013–RLW). Shortly thereafter, Protoviti agreed to produce the requested documents. Within days of Protoviti's agreement, and after more than two years of repeated misrepresentations to the court, FNBO informed Plaintiffs that the manual had been located. The document was finally produced, together with an Affidavit of Ms. Donna Vojteck, FNBO's employee, who represented that the elusive manual had been located by a “screen by screen and folder by folder” review of all files on a departmental shared drive that she regularly accessed in the course of her employment. As stated by Plaintiffs' attorney in their Reply and Supplemental Brief of December 31, 2008 (Docket Entry No. 167), such a search “is akin to searching a well indexed file cabinet by dumping the papers within on the floor and searching page by page while ignoring the routinely used methods of accessing documents contained within.” Vojteck's Affidavit contains no reference to the efforts made to locate the document over the previous two years. In light of the tortured history of discovery in this case, I find Defendant's attempted explanation entirely unworthy of credence.
*7 Defendant's long delinquent production of its pertinent credit manual on December 24, 2008 was part of a document production of approximately 5,000 pages. The documents were received by Plaintiffs on December 29, 2008, five days prior to the expiration of the extended discovery period, and more than a month after defense counsel executed written responses to Plaintiffs' Second Set of Requests for Production of Documents. Plaintiffs argue, with substantial justification, that the timing of Defendant's production effectively deprives them of the benefit of those documents in completing their discovery efforts.
Defendant's initial response to Plaintiffs' Second Requests for Production of Documents mainly consisted of repetitive boilerplate objections. Plaintiffs suggest that the production of any documents at all is likely the result of their contacts with Provtiviti, and Defendant's realization that documents withheld by them would very likely be available from an alternative source. In light of Defendant's conduct throughout the course of discovery in this action, I find the suggestion well justified. Many of the documents only recently produced were responsive to document requests served in 2006. The court's Order of September 5, 2008 obligated Defendant to review all of its previous responses, and to supplement them as necessary. Defendant's failure to produce these documents until Plaintiffs' counsel declared its intention to seek relevant information from Provtiviti is more than suspicious.
In the course of oral argument on January 8, 2009, counsel for Plaintiffs announced their receipt of still more documents from Defendant on January 3, 2009, the day on which the extended discovery period expired. That production amounted to approximately 10,000 pages. Plaintiffs' attorney reports that the documents were not produced in an orderly form, but were presented in a random and disjointed order which defies logical analysis. It is patently obvious that Plaintiffs have been deprived of the effective utilization of those documents in discovery.
Counsel for Defendant argued in response to the instant motion that he never intentionally misinformed the court or withheld anything from the Plaintiffs. He asserts that this is his first FRCA case, and that he was not familiar with his client's employees or business practices. While he conceded that he repeatedly misinformed the court as to the availability of documents, he further stated that his misrepresentations were merely recitations of what his client had told him. None of counsel's assertions can justify Defendant's conduct in this case. FNBO is a sophisticated financial institution. It engages routinely in complex financial transactions governed by a myriad of federal statutes and regulations. It employs a substantial staff, including in house legal counsel and information technology personnel. It is virtually inconceivable that the Defendant could have failed, for more than two years, to understand the nature and extent of its own business records pertaining to Plaintiffs' account, their relevance to the matters in dispute in this action, or their obligation to undertake a meaningful effort to comply with Plaintiffs' discovery requests. This is especially true in light of Defendant's engagement of Protoviti Corporation in a comprehensive review of FNBO's policies and procedures. That FNBO repeatedly professed inability to produce documents for Plaintiffs' benefit in discovery which it was fully capable of locating for its own benefit during the Protoviti review is curious in the extreme. FNBO's discovery responses throughout this case have been half hearted and dishonest. It continued to deny the very existence of relevant records, even in the face of testimony by its own employee (Mr. Schomers) that they did exist and were readily accessible. Only after Plaintiffs confirmed that information through Protoviti did FNBO finally produce its long sought procedure manual—too late for Plaintiffs to make effective use of it in discovery. Similarly, in defiance of an order from the bench for immediate production of other relevant documents, counsel for Defendant delivered them too late for their effective use in scheduled depositions. FNBO's proffered explanations, including the Vojkeck Affidavit, are totally unpersuasive. Defendant has simply exhausted its credibility with a succession of weak excuses.
*8 FNBO has consistently failed to meet its discovery obligations to Plaintiffs for more than two years. It stonewalled their document requests and deposition efforts throughout the original discovery period, and a stipulated extension, and a punitive, court ordered second extension. It appears that, even now, FNBO continues to withhold documents relevant to its administration of Plaintiffs' credit account. Defendant's performance can be explained only by monumental incompetence, inexcusable neglect, or purposeful evasion. None is sufficient to avoid responsibility or sanction. Enough is enough. All of the factors warranting a judgment by default are fully satisfied. This Defendant has been thoroughly dishonest with these Plaintiffs and the court. Its credibility is exhausted. I recommend that the Answer of Defendant FNBO be stricken, that Plaintiffs be awarded judgment by default on the issue of liability, and that the case proceed solely on the issue of damages. Plaintiffs should also be awarded their attorney fees.
The parties to this action may object to and seek review of this Report and Recommendation, but are required to act within ten (10) days of service of a copy hereof as provided for in 28 U.S.C. Section 636(b)(1) and E.D. Mich. LR 72.1(d)(2). Failure to file specific objections constitutes a waiver of any further right of appeal. United States v. Walters, 638 F.2d 947 (6th Cir.1981), Thomas v. Arn, 474 U.S. 140, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985), Howard v. Secretary of HHS, 932 F.2d 505 (6th Cir.1991). Filing of objections that raise some issues but fail to raise others with specificity, will not preserve all the objections a party might have to this Report and Recommendation. Smith v. Detroit Federation of Teachers Local 231, 829 F.2d 1370, 1373 (6th Cir.1987), Willis v. Secretary of HHS, 931 F.2d 390, 401 (6th Cir.1991). Pursuant to E.D. Mich. LR 72.1(d)(2), a copy of any objections is to be served upon this Magistrate Judge.
Within ten (10) days of service of any objecting party's timely filed objections, the opposing party may file a response. The response shall not be more than five (5) pages in length unless by motion and order such page limit is extended by the Court. The response shall address specifically, and in the same order raised, each issue contained within the objections.