Tuesday, December 02, 2008

2008-12-02 Fed. R. Civ. P. 26(g) Used as Basis for Imposing Discovery Abuse Sanctions on Counsel

Case: Name:In re Simonson v. Global FInancial Solution, LLC
Citation: 2008 WL 4830807 (Bktpcy. W.D. Wash. 2008)
Date: 2008-10-27

In this Bankruptcy court adversary proceeding from the Western District of Washington, the Court finds that the counsel for the Debtors engaged in discovery abuse by withholding relevant documents from the Trustee. There was no motion to compel filed. The Court imposed sanctions against Debtors' counsel (but not the Debtor), but did not use either Fed. R. Civ. P. Rule 37 (remember, no MTC was filed) or its inherent powers as a basis for sanctions imposition. Eschewing both Rule 37 and inherent powers, the Court found that Debtors' counsel had violated the attorney certification requirement imposed by Fed. R. Civ. P. 26(g)m and cited that violation as ample substantiation for the imposition of sanctions (payment of Trustee's attorneys fees and costs).

In an interesting exercise of recursivity, the Bankruptcy Court draws from a Washington State precedent, which in turn draws its reasoning from the Federal Rules of Civil Procedure.

Relevant Excerpts:

"Although federal law and the Federal Rules of Civil Procedure apply to this case, a Washington Supreme Court decision, Washington State Physicians Insurance Exchange & Association v. Fisons Corp., 122 Wash.2d 299, 858 P.2d 1054 (1993), provides additional guidance as to how the above described rules should be applied. In addressing whether the lower court should have awarded sanctions against a drug company for discovery abuse, the court held that the inherent power of the court to sanction should not be used where other court rules more properly apply. The court further held that the sanction provision of Washington Civil Rule 37 should not be applied where the more specific provisions of Rule 26 better fit the situation. The court went on to construe Washington Civil Rule 26(g), which is virtually identical to Rule 26(g), Fed.R.Civ.P., looking to federal law for guidance. The court concluded after reviewing federal authorities that “[s]ubjective belief or good faith alone no longer shields an attorney from sanctions under the rules,” that intent need not be shown before sanctions are mandated, and a motion to compel compliance with the rules is not a prerequisite to a sanctions motion. Id. at 1078.The court held that in determining whether an attorney has complied with the rule, the trial court should consider all of the surrounding circumstances, the importance of the evidence to its proponent, and the ability of the opposing party to formulate a response or comply with the request.

"The Trustee's Right to Compensation Under Rule 26(g).

Rule 26(g), Fed.R.Civ.P., applies to the circumstances at issue in this case. Thus, there is no need for the Court to utilize Rule 37 or its inherent powers to issue sanctions. Having found that Herman Recor was not substantially justified in failing to provide discovery to the Trustee, Rule 26(g) requires the Court to award sanctions to the Trustee, including reasonable attorneys' fees caused by the violation.

It should be noted that the Trustee has not sought any sanctions against the Levenhagens. Mr. Levenhagen produced documents promptly and completely. If anything, the Levenhagens were cast in an uncooperative and negative light by their counsel's failure to turn over documents to the Trustee."

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