Court Precludes Offering of Evidence as Sanction for Discovery Evasion

In re LTV Steel Co., Inc., 307 B.R. 37 (N.D. Ohio 2004)

In bankruptcy proceeding, a creditor (“C&K”) submitted a claim for $1.9 million against the estate, a portion of which the debtor agreed was due. When the debtor sought discovery from the creditor relating to the disputed portion of the claim, C&K objected, offering new and different grounds as the debtor attempted to respond to the stated objections.

Eventually, C&K produced a summary, but not the backup, and it declined to produce a database with relevant information. The debtor moved to dismiss the claim as a sanction for C&K’s discovery abuses.

The court concluded that C&K’s failure to adequately respond to interrogatories or requests for production was “certainly willful.” It observed that over nine months had passed since the requests were made and still the documents had not been delivered to the debtor. It continued:

Further, instead of making a good faith effort to comply with LTV’s discovery requests, C&K offered arguments as to why it should not have to produce and keeps changing these arguments so that it is impossible for LTV to completely satisfy C&K. Thus, LTV can never receive the documents which it needs to see, because as soon it resolves one of C&K’s objections, another arises. . . .

The ground shifting tactics of C&K demonstrate willfulness and bad faith. This was not a case of accidental or inadvertent noncompliance. C&K consciously and intentionally failed to adequately respond to LTV’s discovery requests. By constantly shifting its ground, C&K assured itself that it would not have to respond to LTV’s requests since it always had a fresh excuse as to why it need not comply. LTV was forced to wrestle a cloud. This is even more objectionable in the bankruptcy context. Everyone in the case is present because there is not enough money. LTV’s creditors do not have money to waste with discovery games. The estate is administratively insolvent. Any money spent pursuing essential discovery is money that is not going to someone else.

307 B.R. at 45-46. The court went on to find that the debtor was prejudiced by C&K’s discovery tactics, since the discovery was central to the dispute. The court concluded that, while it would be in the court’s discretion to dismiss C&K’s claim for discovery abuse, it would impose a lesser sanction. Thus, the court precluded C&K from offering certain evidence relating to the disputed portion of the claim, effectively ensuring that C&K would only be able to recover the undisputed portion.