R & R Sails, Inc. v. Insurance Co. of Pennsylvania
673 F.3d 1240
| 9th Cir. | 2012Background
- R & R Sails sued AIG for breach of contract, unfair competition, and bad faith denial of an insurance claim regarding losses from a 2001 Australian wildfire.
- District court granted summary judgment on R & R's unfair competition claim; AIG paid remaining policy benefits, leaving only bad faith and Brandt fees/punitive damages in dispute.
- R & R sought Brandt fees and punitive damages; the district court sanctioned R & R for Rule 26(a)/(e) violations and precluded Brandt fees evidence.
- The district court then granted judgment as a matter of law against R & R on the bad faith claim, finding no compensatory evidence without Brandt fees and no basis for punitive damages, and awarded costs to AIG.
- On appeal, the Ninth Circuit reversed and remanded, holding the district court abused its discretion on the discovery sanctions and vacated the related judgment and costs order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether R & R violated Rule 26 disclosures | R & R complied with Rule 26 and invoices were not timely requested. | R & R failed to disclose documents supporting Brandt fees and did not produce invoices timely. | Yes; district court properly found Rule 26 violations and harmlessness was not shown. |
| Whether Rule 37(c)(1) preclusion was appropriate | Sanction was too harsh for minor disclosure failures and invoices were eventually produced. | Invoices were never produced during discovery and disclosure timelines were unmet. | Preclusion was improper as a complete dismissal of the Brandt fees claim without considering alternatives and harmlessness. |
| Whether judgment as a matter of law on bad faith was proper without Brandt fees | R & R could present compensatory evidence via Brandt fees to support punitive damages. | Without Brandt evidence, R & R could not prove compensatory damages to support punitive damages. | Reversed; ruling premised on improper sanctions and absence of Brandt evidence was improper. |
| Whether costs award against R & R should stand on remand | Costs should be borne by AIG only if judgment stands. | AIG was the prevailing party after the district court's decisions. | Reversed and remanded; costs order reversed as part of overall remand for further proceedings. |
Key Cases Cited
- Goodman v. Staples The Office Superstore, LLC, 644 F.3d 817 (9th Cir. 2011) (discovery sanctions reviewed for abuse of discretion)
- Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101 (9th Cir. 2001) ( Rule 37(c)(1) sanctions and need for willfulness/bad faith findings)
- Hoffman v. Constr. Protective Servs., Inc., 541 F.3d 1175 (9th Cir. 2008) (preclusion of damages evidence; standards for sanctions)
- Henry v. Gill Indus., Inc., 983 F.2d 943 (9th Cir. 1993) (willfulness, fault, or bad faith required for certain sanctions)
- Wyle v. R.J. Reynolds Indus., Inc., 709 F.2d 585 (9th Cir. 1983) (consideration of less severe sanctions when sanctions are imposed)
- Design Strategy, Inc. v. Davis, 469 F.3d 284 (2d Cir. 2006) (requirement to consider continuances or cure prejudices in sanctions)
- S. States Rack & Fixture, Inc. v. Sherwin-Williams Co., 318 F.3d 592 (4th Cir. 2003) (sanctions analysis for discovery violations)
- Tex. A&M Research Found. v. Magna Transp., Inc., 338 F.3d 394 (5th Cir. 2003) (continuance and prejudice considerations in sanctions)
- Amarel v. Connell, 102 F.3d 1494 (9th Cir. 1996) (remedies when reversing district court judgment affect costs)