“Flexing its Substantial Muscle” Federal District Court Appoints Discovery Monitor and Imposes Severe Sanctions

In a lengthy opinion, the U.S. District Court of the Distrct of New Jersey in Wachtel v. Health Net, Inc., 2006 WL 3538935 (D.N.J. Dec. 6, 2006), cited Rule 37 and its inherent equitable powers as the basis to impose extensive sanctions for breach of discovery obligations. This is a case where inside counsel, outside counsel and corporate executives all had a hand in the result and each were singled out by the court as sharing responsibility for violating “the integrity of th[e] Court’s judicial process.”

The sanctions include: (1) deeming facts admitted in evidence, (2) precluding introduction of evidence, (3) striking privilege assertions, (4) sanctions against outside counsel, (5) monetary sanctions, and (6) appointment of a special master to monitor discovery.

Here is a glimpse of the court’s reasoning in imposing such harsh sanctions:

“The Defendants have harmed the Plaintiffs in this case by: (1) deliberately failing to timely search and produce responsive documents and thereby causing Plaintiffs to take scores of depositions and prepare their lay and expert witnesses for trial without the discovery that they had properly sought; (2) willfully concealing that no effective search was ever conducted for electronic documents; (3) deliberately causing Plaintiffs to conduct depositions hindered by an incomplete set of each deponents’ documents, and causing Plaintiffs to prepare their case, including the summary judgment motions, without full discovery; (4) forcing Plaintiffs to seek Court intervention over and over again, wasting a huge amount of time and money in order to secure responses to their discovery requests when good faith compliance with the Federal Rules of Civil Procedure would have made such continuous costly intervention unnecessary; (5) employing a strategy of delay that has cost Plaintiffs inordinate amounts of time and money and has deprived them of the testimony of witnesses whose memories have faded in the years since this litigation began; and (6) concealing Defendants’ non-compliance with discovery orders from the Plaintiffs by systematically ignoring adverse rulings.”



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