The death penalty sanction is very rare in litigation, but it does happen. In Hornady v. Outokumpu Stainless U.S., No. 18-00317-JB-N (S.D. Ala. 11/18/2021), the court specifically found the defendant had obstructed discovery for years. The lawsuit concerned a Fair Labor Standards Act collective action – a class action lawsuit. As part of every FLSA lawsuit, the employee and employer must exchange their records regarding work schedules and pay. The employee may have only a few records. But, the employer will have all the pay records. The FLSA requires the employer to maintain those pay records. In most cases, it is a simple discovery request to see those payroll records.
But, in Hornady, that discovery process stretched on an on. Six months after discovery had closed, the defendant still had not produced those pay records. At a show cause hearing in March, 2021, the defense lawyer essentially tried to assign blame to the payroll processor, ADP. But, as the Judge noted, the defendant is the defendant.
As the court said in the opening paragraph of its sanction order:
“This case is lamentable. Mercifully, it is rare. Here, the Court is compelled to protect not only the plaintiffs but the Court itself from a defendant’s pervasive bad faith.”
Mid-way through discovery, the Magistrate Judge addressed the failure to produce the pay records. The Defendant blamed Automatic Data Processing (ADP). The Magistrate Judge ordered the Defendant to submit a subpoena to ADP. Outokumpu served the subpoena, but then told the court that ADP had not complied with he subpoena. When, in fact, ADP had complied. In any event, Defendant still did not provide the pay records. The Magistrate Judge, not knowing that ADP had actually complied, recommended sanctions lesser than default.
At that point, Defendant changed course. It argued that the request for the pay records was based on faulty testimony from its own corporate representative. Outokumpu said it would submit an affidavit “correcting” the corporate representative’s testimony. It argued that the records already provided were accurate enough. The defendant also argued that the ADP records were no longer needed. Both parties objected to the Magistrate’s recommendation. The defendant never submitted that “correcting” affidavit. So, the issue then went to the Judge. It is the Judge’s role to review the Magistrate’s recommendation.
The Judge looked at the lawsuit record himself and found five motions to compel had been filed. Two motions for sanctions had been filed. Twelve orders had bene issued telling the defendant to produce the pay records. Yet, each time, the defendant told the Magistrate it would comply with the Magistrate’s latest order. But, it never did comply.
ADP did not Attend
So, in February, 2021, the Court held a hearing. The defendant again represented that ADP had failed to to provide the requested records. ADP was not cooperating, said the employer. The Court then set a show cause hearing. It ordered the defendant to serve ADP with a copy of the order. ADP was to appear with a chronology detailing its attempts to satisfy the subpoena. Defendant was to give ADP ten days notice of the hearing. Instead it gave them only four days. Contrary to the Court’s order, Outokumpu told ADP it need not attend the hearing if it produced the pay records. ADP then failed to appear for the show cause hearing. The court then re-set the show cause hearing. In litigation, a “show cause” hearing has no formal definition, but it usually means bring your stuff or else.
ADP did Comply
At the second show cause hearing, ADP presented evidence indicating it had in fact produced many of the requested records some seven months prior – after it received the subpoena. The Court found Outokumpu did not deny that it had doctored spreadsheets and produced false pay records. The employer then blamed the plaintiff and ADP. Outokumpu never offered a substantive explanation for why it had failed to provide the records it had previously agreed to provide. At the March 12, 20201 hearing, the degree of the defendant’s obfuscation and delay became apparent, The Court found that the employer had “sabotaged” the judicial process for over two years.
The employer knew from October, 2018 which records Plaintiff was reasonably requesting. Yet, the employer did not engage with ADP about these records until the summer of 2020. That was when Outokumpu was ordered to subpoena the records from ADP. Throughout the litigation, as the plaintiff submitted motions to compel, the defendant would meet with the plaintiff and agree to provide documents and information. But, each time, it would produce little or nothing. When the plaintiff would file a motion to compel, the defendant would plead confusion and inadvertent oversight. The defendant would claim that it acquired valuable new information at the meeting with the plaintiff about what was requested. The parties held two settlement conferences, both of which were based on inaccurate pay records. At a deposition of the corporate representative, it became clear that that the accurate records were in color. The various colors indicated critical aspects of the pay protocols. All Defendant had produced up to that point were black and white spreadsheets. All of this amounted to bad faith, said the court.
At the show cause chairing, the Judge had some parting words for the defendant. The Judge quoted the plaintiff’s remark: “At every step, plaintiffs have been pleasantly, professionally, and civilly stonewalled.” The lawyer for the defendant was Gavin Appleby. He was from Georgia, not Alabama. So, he appeared in the Alabama lawsuit on a pro hoc basis. The Judge suspended that pro hoc admission at the close of the hearing.
The Court then imposed the ultimate sanction, finding Outokumpu in default. The court issued a 94 page opinion. See the decision here.