Recounting Defendants’ “Systemic and Shocking” Discovery Abuses, Court Imposes Severe Sanctions and Appoints Discovery Monitor

Wachtel v. Health Net, Inc., 239 F.R.D. 81 (D.N.J. 2006)

In this lengthy opinion, the court ruled upon plaintiffs’ motion for entry of default based upon defendants’ discovery misconduct and other discovery-related motions. Although it reserved judgment on whether a default should be entered, the court found that a variety of severe sanctions were appropriate given defendants’ “systemic and shocking” discovery abuses. The sanctions included: (1) deeming certain facts as admitted by defendant for all purposes in the litigation, including equitable relief; (2) precluding defendant’s use of documents not produced in discovery; (3) striking privilege assertions as to certain documents; (4) imposing monetary sanctions in an amount to be determined after the court considered defendant’s financial situation; and (5) appointing a discovery monitor at defendants’ expense to review defendants’ compliance with the court’s discovery orders. The court explained:

Defendants’ strategy has been a concerted war to waste huge time and resources of Plaintiffs in pursuing this litigation. It gives “scorched earth litigation” a new standard of brashness. Defendants have also forced the Court to devote years to police discovery abuses over and over again. Defendants continue to ignore the Court’s rulings over and over again. Defendants’ persistent pattern of delay, defiance of Court Orders, evasive responses to Plaintiffs’ discovery requests, and lack of candor have resulted in crushing prejudice to Plaintiffs in the form of forgetful witnesses and extraordinary expenditures of time, effort, and money. The wanton waste of judicial resources caused by Health Net, as exemplified herein, is equally staggering.

The court noted that the Magistrate Judge had issued “dozens and dozens” of orders since the summer of 2003 in furtherance of her efforts to supervise discovery and pretrial procedures in the case, but that the Health Net defendants had ignored many of these orders by “interpreting” them to avoid their discovery obligations.

The opinion details many of defendants’ discovery failings and describes the prejudice that resulted both to plaintiffs and to the court. The court faulted, among other things, defendants’ approach to responding to discovery requests:

Health Net’s process for responding to discovery requests was utterly inadequate, relying on an in-house paralegal also responsible for approximately 60 other cases. Testimony . . . revealed that when Health Net received document requests from Plaintiffs, it did not disseminate a comprehensive notice to employees who could reasonably be anticipated to possess responsive documents. Instead, Health Net directed its outside counsel to work with HNNE’s local paralegal who would approach selected individuals about certain specific documents pursuant to instructions from Health Net’s outside counsel. Once he asked these specific individuals for specified documents, the paralegal generally did not follow up with them to see if they had further responsive documents unless specifically instructed to do so by outside counsel or by the senior litigation counsel for Health Net, Inc. Nor did the paralegal attempt to identify other employees with responsive documents. Health Net relied on the specified business people within the company to search and turn over whatever documents they thought were responsive, without verifying that the searches were sufficient. The process, in sum, was one of looking for selected specific documents by a specific person rather than all responsive documents from all Health Net employees who had such documents. Many of these specific employee-conducted searches managed to exclude inculpatory documents that were highly germane to Plaintiffs’ requests.

(Footnote omitted.)