HCG Platinum, LLC v. Preferred Product Placement Corp.
2017 U.S. App. LEXIS 20229
10th Cir.2017Background
- HCG Platinum, LLC (HCG) hired Preferred Product Placement Corp. (PPPC) under a Manufacturer’s Representative Agreement and a separate Non‑Circumvention Agreement to place HCG products in retailers and pay commissions.
- HCG sued PPPC for breach; PPPC counterclaimed alleging unpaid commissions and interference with third‑party relationships and sought damages “according to proof.”
- PPPC’s only damages disclosure (Aug. 4, 2011) presented multiple unsupported, projected computations (e.g., $1.84M, $3.83M, $7.54M) and referenced an unavailable chart; PPPC never supplemented those disclosures.
- Discovery disputes followed; PPPC served follow‑up discovery in 2015 but did not timely move to compel earlier inadequate responses; district court found PPPC’s motion to compel untimely.
- On HCG’s motion under Fed. R. Civ. P. 37(c)(1) the district court excluded PPPC’s damages evidence for failure to supplement, later concluding exclusion left PPPC no basis to prove damages and entering judgment for HCG on PPPC’s counterclaims.
- The Tenth Circuit reversed, holding the district court abused its discretion by failing to meaningfully apply the Woodworker’s factors and by not considering lesser sanctions when exclusion carried the effect of dismissal.
Issues
| Issue | Plaintiff's Argument (HCG) | Defendant's Argument (PPPC) | Held |
|---|---|---|---|
| Whether exclusion under Rule 37(c)(1) was appropriate for PPPC’s failure to supplement damages disclosures | PPPC’s disclosures lacked a reliable computation or explanation and required expert support; exclusion is compelled because PPPC did not designate an expert or supplement | Prejudice to HCG is slight and curable; HCG’s own discovery responses were inadequate; limited additional discovery would cure any prejudice | Reversed: district court abused discretion by not properly applying Woodworker’s factors and not considering lesser sanctions when exclusion operated as dismissal |
| Whether the district court adequately applied the Woodworker’s four‑factor test | Exclusion justified by insufficiency and untimeliness of PPPC’s disclosures; district court need not recite magic words | District court initially indicated factors weighed against exclusion (no bad faith; curable prejudice) and lacked reasoned explanation for reversing course | Held that the court failed to meaningfully analyze all Woodworker’s factors and failed to explain its change in position; legal error |
| Whether courts must consider lesser sanctions when Rule 37(c)(1) exclusion would have the effect of dismissal | Extreme sanction unnecessary; district court enforcement of rules supports exclusion | Exclusion here functioned as dismissal of counterclaims; district courts should weigh lesser alternatives before imposing case‑ending sanctions | Held that when exclusion will effectively dismiss claims, courts must consider lesser sanctions alongside the Woodworker’s analysis |
| Whether appellate reversal is required where district court excluded damages evidence without adequate analysis | Exclusion appropriate—no abuse of discretion | Abuse of discretion because of failure to (1) consider all Woodworker factors, (2) explain its change of course, and (3) evaluate lesser sanctions | Tenth Circuit reversed and remanded for reconsideration under Woodworker’s factors and consideration of lesser sanctions |
Key Cases Cited
- Woodworker’s Supply, Inc. v. Principal Mut. Life Ins. Co., 170 F.3d 985 (10th Cir. 1999) (articulates four‑factor test for harmlessness/justification under Rule 37(c)(1))
- Neiberger v. Fed. Exp. Ground Package Sys., Inc., 566 F.3d 1184 (10th Cir. 2009) (standard of review: exclusion reviewed for abuse of discretion)
- Jacobsen v. Deseret Book Co., 287 F.3d 936 (10th Cir. 2002) (district court should consider Woodworker’s factors; failure to do so is abuse of discretion)
- Eugene S. v. Horizon Blue Cross Blue Shield of N.J., 663 F.3d 1124 (10th Cir. 2011) (district court should consider Woodworker’s factors when ruling under Rule 37(c)(1))
- Jewell v. Life Ins. Co. of N. Am., 508 F.3d 1303 (10th Cir. 2007) (discretionary decisions require sufficient explanation to permit meaningful appellate review)
- The Procter & Gamble Co. v. Haugen, 427 F.3d 727 (10th Cir. 2005) (Ehrenhaus factors for dismissal as discovery sanction; dismissal is an extreme sanction and lesser sanctions must be considered)
- Ehrenhaus v. Reynolds, 965 F.2d 916 (10th Cir. 1992) (dismissal is extreme sanction; consider culpability, prejudice, interference, warning, and lesser sanctions)