ECCLESIASTES 9: 10-11-12, INC. v. LMC Holding Co.
497 F.3d 1135
10th Cir.2012Background
- Plaintiffs acquired assets via asset purchase agreement (APA) with LMC Holding in 1992; closing occurred January 5, 1993 with partial payment and notes, but closing-date documentation and adjustments were not delivered within 77 days.
- DeLorean was plaintiffs' sole representative and key witness; after closing he reportedly provided critical information for the case and was to testify as Rule 30(b)(6) designee.
- Case filed in 1995 alleging breach of contract, fraud, securities fraud, and RICO; defendants counterclaimed for breach, fraud, and misrepresentation.
- Discovery slowed and bankruptcy filings led to administrative stay; action reopened in 2004 but DeLorean’s deposition and Rule 30(b)(6) issues persisted.
- In 2005 DeLorean died; district court dismissed the entire action with prejudice under Rule 41(b) for failure to prosecute, after considering Ehrenhaus factors.
- Appellate court affirmed, holding no abuse of discretion and that the Ehrenhaus analysis supported dismissal given prejudice, interference, culpability, notice, and lack of lesser sanctions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Rule 41(b) applicability to discovery delay | Rule 41(b) inapplicable to discovery disputes under Rule 37. | Rule 41(b) proper given dilatory discovery conduct and loss of key testimony. | Rule 41(b) dismissal upheld; Ehrenhaus factors appropriate. |
| Prejudice from loss of DeLorean testimony | Death of DeLorean does not prejudice defendants; harms plaintiffs only. | Loss of critical deposition prevented defense and fact-finding. | Substantial prejudice found; loss of unique testimony prejudiced defendants. |
| Interference with judicial process | Dispute over Rule 30(b)(6) designations was good-faith discovery fight. | Ecclesiastes delayed and withdrew witnesses, undermining discovery. | Willful interference established; discovery delays disrupted process. |
| Culpability of Ecclesiastes | Any delays were due to reasonable objections and control issues over witnesses. | Ecclesiastes engaged in willful, prolonged delay and withdrew DeLorean as designee. | Ecclesiastes found culpable under Ehrenhaus. |
| Availability of lesser sanctions | Sanctions shorter of dismissal sufficient given circumstances. | No workable lesser sanctions due to irreparable loss of testimony. | Lesser sanctions deemed insufficient; dismissal appropriate. |
Key Cases Cited
- Ehrenhaus v. Reynolds, 965 F.2d 916 (10th Cir.1992) (non-merits factors govern dismissal for dilatory conduct)
- Rogers, 357 U.S. 197 (1958) (Rule 37 as exclusive mechanism for discovery-related sanctions in some contexts)
- Archibeque v. Atchison, Topeka and Santa Fe Ry. Co., 70 F.3d 1172 (10th Cir.1995) (inherent authority dismissal supported where conduct undermines judicial process)
- Jones v. Thompson, 996 F.2d 261 (10th Cir.1993) (dismissals should consider prejudice and procedural conduct)
- Gripe v. City of Enid, 312 F.3d 1188 (10th Cir.2002) (Ehrenhaus factors support dismissal for discovery-related prejudice)
- Nasious v. Two Unknown B.I.C.E. Agents, 492 F.3d 1158 (10th Cir.2007) (abuse-of-discretion review for Rule 41(b) dismissals)
- Meade v. Grubbs, 841 F.2d 1512 (10th Cir.1988) (Rule 41(b) dismissal as a last resort)