COMPANION HEALTH SERVICES, INC. v. Kurtz
675 F.3d 75
| 1st Cir. | 2012Background
- Three-year contract dispute over Wal-Mart DME licensing; veil-piercing claim sought against individuals; discovery conduct led district court to sanction with default as to veil-piercing count; district court later vacated default on merits but kept veil-piercing default for further proceedings; jury awarded Companion over $1 million; cross-appeal denied prejudgment interest on part of damages.
- Discovery process included attorney withdrawal, delayed responses, multiple extensions, and late depositions; individuals were unrepresented during key deadlines, with limited docket notice.
- District court's sanction relied on a single missed production deadline deemed willful; court held a subsequent lifting request insufficiently tied to broader pattern of misconduct; on appeal, court vacated default and remanded for further findings.
- The district court's default as to the veil piercing count is vacated and remanded for fuller fact-finding on sanctions.
- Companion cross-appeals prejudgment interest denial; district court’s interpretation of Massachusetts prejudgment interest law upheld; proceeding confirms no prejudgment interest on excess attorney's fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether default on veil piercing was an abuse of discretion | Kurtz/Reid: misconduct not willful; single incident not justify default | Kurtz/Reid: sanction too harsh; unrepresented parties unaware of deadlines | Vacated; remanded for further sanctions findings |
| Whether to lift or modify the veil-piercing default after further proceedings | Companion: default should stand if justified | Defendants: adequate progress; should lift default | Remand for additional findings; potential alternative sanctions allowed |
| Prejudgment interest on damages and attorney’s fees under Massachusetts law | Interest should accrue on entire damages under Mass. law | Interest limited to damages requested; excess awarded as fees | Affirmed denial of prejudgment interest on excess; no abuse of discretion |
Key Cases Cited
- Remexcel Managerial Consultants, Inc. v. Arlequín, 583 F.3d 45 (1st Cir. 2009) (abuse of discretion standard for sanctions; deference to district court)
- Verizon New Eng., Inc. v. Global NAPs Inc., 603 F.3d 71 (1st Cir. 2010) (default judgment on veil piercing requires substantial misconduct findings)
- SNET v. Global NAPs Inc., 624 F.3d 123 (2d Cir. 2010) (pattern of obstruction supports default; notice of obligations matters)
- KPS & Assocs., Inc. v. Designs by FMC, Inc., 318 F.3d 1 (1st Cir. 2003) (district court is best to assess circumstances in sanctions cases)
- Crossman v. Raytheon Long Term Disability Plan, 316 F.3d 36 (1st Cir. 2002) (single incident generally insufficient for severe sanctions)
- Tower Ventures, Inc. v. City of Westfield, 296 F.3d 43 (1st Cir. 2002) (judicial deference to trial judge’s sanctions decisions)