*1 On December 15, 2022, Plaintiffs FA ND Chev, LLC and FA ND Sub, LLC (“Plaintiffs’) filed a “Motion for Sanctions Against Defendant Robert Kupper.” (Doc. No. 154). Plaintiffs request this Court impose sanctions against Defendant Robert Kupper (“Kupper”) and his counsel for withholding a document containing a series of text messages during the discovery process. For the reasons articulated below, the motion is GRANTED.

I. BACKGROUND

This action arises following a business transaction involving the sale and purchase of motor vehicle and service businesses (“dealerships”) in June 2019. The transaction consisted of Kupper selling five Chevrolet and Subaru dealerships located in and around Mandan, North Dakota. This transaction also included non-competition and non-solicitation agreements between Kupper and Plaintiffs. The members of FA ND Chev, LLC are Chuck Kramer, Jr. and Foundation Auto Holdings, LLC. Foundation Auto Holdings, LLC is owned by Foundation Automotive U.S. Corp. (“FA”).

Plaintiffs allege that Kupper violated the agreements “almost immediately” by conspiring “to take back” the business Kupper had sold to Plaintiffs. (Doc. No. 77). Plaintiffs assert Defendants engaged in recruiting multiple employees away from Plaintiffs, and that Kupper publicly defamed Plaintiffs’ business reputation. (Id.). “Plaintiffs are alleging damages in the nature of lost profits, loss of goodwill, loss of valuable employees, loss of clients and customers, the impairment of Plaintiffs’ future earning capacity, and damage to business reputation.” (Doc. No. 69) (quotations omitted). Defendants deny these allegations and Kupper asserts any employees who have left Plaintiffs’ businesses did so because of Plaintiffs’ mismanagement. (Id.).

On May 11, 2023, Judge Traynor issued an order consolidating the FA ND Chev case with the related BAPTKO case. In the BAPTKO case, BAPKTKO, Inc. alleges when it sold the dealerships to FA the asset purchase agreement included an earn out provision that entitled BAPTKO to payments each calendar year once certain conditions were met. (No. 1:21-cv-183, Doc. No. 3). BAPTKO alleges the FA entities breached the asset purchase agreement when they failed to pay BAPTKO under the terms of the earn out provision. (Id.).

In October of 2021, Kupper produced an excerpt from a text message exchange between Kelsey Hanson and Kevin Kutschinski. Hanson was a former employee of Plaintiffs and later went to work for Defendant BMC Marine, LLC (“Moritz”). Kutschinski serves as the chief executive officer of FA. Kupper has repeatedly asserted this text message exhibit shows evidence of Kutschinski sexually harassing Hanson. (Doc. Nos. 71-2, 78, 159-2). Kupper argues this alleged sexual harassment caused Hanson to leave her job with Plaintiffs and to go work for Moritz—not Kupper recruiting her as the complaint alleges.

In September of 2022, the parties deposed Kutschinski. During the deposition, Kupper's counsel introduced a document containing additional text messages from the conversation between Hanson and Kutschinski. Plaintiffs’ counsel objected because the document had not been previously produced. Kupper's counsel asserted they did not need to produce the text messages because there was no “written discovery request from [Plaintiffs] asking for texts between Mr. Kutschinski and Ms. Hanson” made to Kupper. (Doc. No. 249-6 at 94). Kupper's counsel argued the requests made to Moritz for the same did not matter because Kupper's counsel did not represent Moritz. (Id. at 93). Plaintiffs’ counsel argued Kupper and his counsel had a duty to produce the document because they “clearly were going to use [it] to support [their] defenses.” (Id. at 95). Kupper's counsel ultimately admitted they may use the document to support Kupper's defense during an additional exchange that went as follows:

(Id.). Shortly after this exchange, Plaintiffs ended the deposition of Kutschinski.

Kupper states, “Copies of the texts at issue were given to Defendant Kupper's counsel by Hanson around August 26, 2020.” (Doc. No. 157). The parties do not dispute that Kupper's counsel disclosed the additional text messages for the first time during Kutschinski's deposition. Rather, they dispute whether Kupper was required to initially disclose them under Fed. R. Civ. P. 26(a)(1) and, if so, whether sanctions are warranted under Fed. R. Civ. P. 37(c) for failing to make the initial disclosure.

II. LEGAL STANDARD

A. Initial Disclosures

Rule 26(a)(1), Fed. R. Civ. P. states:

(Emphasis added).

“Use” in the context of Rule 26(a)(1) “includes any use at a pretrial conference, to support a motion or at trial.” Amendments to the Federal Rules of Civil Procedure, 192 F.R.D. 340, 385 (2002). Additionally, “the disclosure obligation is also triggered by intended use in discovery, apart from use to respond to a discovery request; use of a document to question a witness during a deposition is a common example.” Id. “As case preparation continues, a party must supplement its disclosures when it determines that it may use a witness or document that it did not previously intend to use.” Id. at 386.

Other courts have explained, “To date the specific form initial disclosures must take has not been the subject of many decisions in either the appellate or district courts.” Robinson v. Champaign Unit 4 School Dist., 412 Fed. Appx. 873, 877 (7th Cir. 2011); see also Sender v. Mann, 225 F.R.D. 645, 650 (D. Co. 2004) (“This court has found very few cases that address the degree of specificity required under Rule 26(a)(1).”). As a result, courts have looked to the Advisory Committee Notes to the 1993 Amendments to Rule 26(a) to understand the specificity required by the rule. Sender, 225 F.R.D. at 650. From this analysis it has been determined:

*3 Id. A court should apply Rule 26(a)(1)’s disclosure requirements “with common sense in light of the principles of Rule 1, keeping in mind the salutary purposes that the rule is intended to accomplish.” Advisory Committee Notes to 1993 Amendments to Fed. R. Civ. P. 26(a).

Rule 26(a)(1) allows a party to not disclose a document when it its use “would be solely for impeachment.” However, there is a fine line between substantive use and use solely for impeachment. In the context of impeachment by contradiction it has been said:

Paul W. Grimm, et al., Discovery Problems and their Solutions 335-36 (3d ed. 2013) (emphasis in original).

The Advisory Committee Notes to Rule 26(a)(1) warn, “[t]he litigants should not indulge in gamesmanship with respect to the disclosure obligations.” Id. The Sender court has expounded on this warning saying, “Counsel who make the mistake of treating Rule 26(a)(1) disclosures as a technical formality, rather than as an efficient start to relevant discovery, do their clients no service and necessarily risk the imposition of sanctions.” Sender, 225 F.R.D. at 650.

B. Sanctions

Rule 37(c)(1), Fed. R. Civ. P., provides:

The Eighth Circuit Court of Appeals explained the “substantially justified or harmless” standard in Rodrick v. Wal-Mart Stores East, L.P., 666 F.3d 1093, 1096-97 (8th Cir. 2012). The court said:

Id. (internal citations and quotations omitted).

III. DISCUSSION

A. Kupper's Delayed Disclosure of the Document

*4 Plaintiffs argue Kupper and his counsel violated Rule 26(a)(1) when they failed to disclose and/or describe the text message document in Kupper's initial disclosures. Kupper responds arguing the document was encompassed in his initial disclosures and other defendants and third parties, but not Kupper, had the duty to disclose it. Kupper also argues he planned to use the document solely to impeach Kutschinski. The Court will address each argument in turn.

Kupper argues the document was described in his initial disclosure which reads, “Various documents within the control of Plaintiffs, Defendant Bismarck Motor Company, and Defendant BMC Marine LLC d/b/a Moritz Sport & Marine in this matter which have not yet been provided and/or produced, to the extent not objected to.” (Doc. No. 155-2). Kupper provided this initial disclosure on December 14, 2020. (Id.). The Court is not convinced by Kupper's argument. By Kupper's own admission, Hanson provided the document to his counsel “around August 26, 2020.” (Doc. No. 157). As a result, the document was in Kupper and his counsel's “possession, custody, [and] control” for almost four months before he provided his initial disclosures—irrespective of whether it was also in the possession of “Plaintiffs, Defendant Bismarck Motor Company, and Defendant BMC Marine LLC.” Fed. R. Civ. P. 26(a)(1)(A)(ii).

Further, the Court finds the extremely broad initial disclosure Kupper references does not comply with the requirements of Rule 26(a)(1) to disclose the document. The disclosure provides no information about the categories of information Kupper is seeking to disclose and does not “help focus the discovery that is needed, and facilitate preparation for trial or settlement.” Advisory Committee Notes to 1993 Amendments to Fed. R. Civ. P. 26(a). The disclosure does little more than name the other parties involved in the case and state they may have relevant documents. This is not what was intended when Rule 26(a)(1) was created. See generally Advisory Committee Notes to Fed. R. Civ. P. 26(a). Kupper also had no issue listing other unrelated text messages by date, sender and recipient, general nature, and Bates stamp in his other disclosures. (See Doc. No. 155-2). Moreover, during the status conference concerning this matter, the Court asked if the document was turned over as part of Kupper's initial disclosures. (Doc. No. 122). Kupper's counsel responded, “It had not.” (Id.). It appears Kupper has “treat[ed] Rule 26(a)(1) disclosures as a technical formality, rather than as an efficient start to relevant discovery” and, as a result, “necessarily risk[ed] the imposition of sanctions” with the underlying motion. Sender, 225 F.R.D. at 650.

Kupper also argues he had no duty to respond to third-party subpoenas and discovery requests made to other parties. Although that may be the case, Kupper cannot wash his hands of his Rule 26(a)(1) obligation by arguing others had a duty to produce the document via subpoena, discovery requests, or otherwise.[1]

*5 Kupper argues the document is excluded from Rule 26(a)(1)’s disclosure requirement because he used it as impeachment evidence to contradict Kutschinski's testimony. The Court disagrees. The complaint alleges “Kupper breached the Restrictive Covenants in the Non-Compete Agreement by directly and indirectly soliciting Plaintiffs’ employees, inducing them to quit their jobs, and/or hiring them to work for Defendants.” (Doc. No. 3). Throughout this litigation, Kupper has repeatedly asserted as a defense that Hanson left her employment with Plaintiffs because she was sexually harassed by Kutschinski and not because Kupper induced her to quit by soliciting her to come work for Moritz.

The document goes to the heart of Kupper's defense regarding Hanson, as it contains probative and more complete information regarding the issue of potential sexual harassment. Even from a brief review, it is clear the document may prove pivotal for Kupper's defense and resolution of why Hanson left Plaintiffs’ dealership. Kupper has already used the previously disclosed portion to support his defense, and his counsel admitted at Kutschniski's deposition they may use the document for Kupper's defense. (Doc. No. 249-6 at 95). Further, by its very nature, contradictory evidence cannot be used solely to impeach as Kupper argues, and a party is required to disclose it under Rule 26(a)(1). Grimm, supra, at 336. Kupper's argument requires extensive mental gymnastics to conclude the more complete conversation would be used solely as impeachment evidence. Therefore, the Court finds Kupper violated Rule 26(a)(1) when he failed to disclose the document.

B. Appropriate Sanctions

Because Kupper and his counsel failed to comply with their obligation under Rule 26(a)(1) the Court must now determine what sanctions are appropriate, if any. The automatic sanction for failing to provide information under Rule 26(a) is a prohibition on using the information “to supply evidence on a motion, at a hearing, or a trial, unless the failure was substantially justified or is harmless.” Fed. R. Civ. P. 37(c)(1). After considering the four factors articulated by the Eighth Circuit in Rodrick this Court concludes the failure was not substantially justified or harmless. Plaintiffs were surprised by the unexpected disclosure of the document and did not have the ability to ask previously deposed witnesses about it. However, the Court does not believe it should prohibit use of the document moving forward, as it may assist parties in the resolution of this litigation.

Instead of the automatic prohibition, the court “may impose other appropriate sanctions.” Fed. R. Civ. P. 37(C)(1)(C). Considering the circumstances, the Court finds an appropriate award of sanctions to Plaintiffs are costs and attorneys’ fees for preparation of this motion and any additional expenses to complete the deposition of Kutschinski. The Court will also award costs for additional depositions of any other witnesses previously questioned about the text message conversation between Hanson and Kutschinksi, including Hanson herself. Any new depositions to these individuals pursuant to this order shall be for the limited purpose of inquiring regarding the complete exchange between Hanson and Kutschinski in the document. The parties are directed to attempt resolution of the award of costs and fees without court intervention. Failing that, Plaintiffs may submit information regarding calculation of the same in connection with this motion.

IV. CONCLUSION

For the reasons articulated above, the Court GRANTS Plaintiffs’ motion (Doc. No. 154) and finds Kupper and his counsel violated their obligation under Rule 26(a)(1) to initially disclose the document. Sanctions are imposed against Kupper for Plaintiffs’ attorneys’ fees and costs for preparation of this motion and deposition costs involving the document.

*6 IT IS SO ORDERED.