Court Upholds $2,442,440.97 in Discovery Abuse Sanctions

Nartron Corp. v. General Motors Corp., 2005 WL 26991 (Mich. Ct. App. Jan. 6, 2005) (unpublished)

In a prior appeal, the court affirmed the trial judge’s order granting summary judgment dismissing plaintiff’s breach of contract claim and dismissing with prejudice plaintiff’s remaining claims as a sanction for discovery abuses. See Nartron Corp. v. Gen. Motors Corp., 2003 WL 1985261 (Mich. Ct. App. Apr. 29, 2003) (unpublished). Thereafter, the trial court entered judgment ordering plaintiff to pay costs and sanctions in the amount of $2,442,440.97, representing $1,912,630.66 in attorneys’ fees, $159,542.10 in legal assistant fees, $361,641.71 in expert witness fees, and additional costs for the special discovery master. The trial court further ordered plaintiff to pay prejudgment interest in the amount of $1,708,515.77, for a total judgment of $4,150,956.24.

On appeal, plaintiff argued that GM was required by court rule (MCR 2.313(B)(2)) to segregate its costs and attorney fees into those “caused by” violations of discovery orders and those that would have been incurred in the absence of those violations. Plaintiff further argued that because GM ignored the “caused by” requirement, Nartron was forced to reimburse GM for attorney fees related to GM’s own discovery misconduct. The appellate court disagreed, finding that the trial court did segregate the attorneys fees to the extent it only awarded GM attorneys’ fees after December 7, 1994. It noted that, in doing so, the trial court specifically recognized that, under the court rule, it could only award attorney fees and costs caused by the failure to obey the discovery order(s), and determined that plaintiff’s conduct in failing to produce the FoxPro database in response to the first request for discovery, or in response to the first order to produce, “tainted, corrupted, or permeated all of the discovery in the case.” The appellate court further noted that GM’s counsel had testified regarding the breakdown of the attorney fees requested into certain time frames and the significance of those particular time frames, and that plaintiff had made no argument about how the fees should otherwise be segregated.

Plaintiff next argued that the trial court’s finding that plaintiff’s decision not to produce the FoxPro database “tainted, corrupted, or permeated all of the discovery in this case” was unsupported and clearly erroneous because it produced more than 61,000 pages of documentation and GM never made the claim that all of those documents were fraudulent. The court rejected this argument as well, noting that the trial court did not state that all documents provided by plaintiff were fraudulent, and that plaintiff had made no other argument to demonstrate exactly how its behavior did not taint, corrupt, or permeate all the discovery.

The appellate court affirmed the trial court’s order awarding GM its attorneys’ fees and costs (including expert witness fees) as sanctions. However, it reversed the trial court’s award of prejudgment interest on the award, deciding that Michigan’s prejudgment interest statute, MCL 600.6013, was not properly applied to an award consisting solely of monetary sanctions under MCR 2.313(B)(2).