KENNETH BISIG, et al., Plaintiffs-Appellants/Cross-Appellees, v. TIME WARNER CABLE, INC., Defendant-Appellee/Cross-Appellant.
Nos. 18-5421/5483
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
October 4, 2019
RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit I.O.P. 32.1(b) File Name: 19a0256p.06. Argued: January 16, 2019. Appeal from the United States District Court for the Western District of Kentucky at Louisville. No. 3:14-cv-00036–David J. Hale, District Judge.
Before: MERRITT, GIBBONS, and NALBANDIAN, Circuit Judges.
ARGUED: Victor B. Maddox, FULTZ MADDOX DICKENS PLC, Louisville, Kentucky, for Appellants/Cross-Appellees. C. Celeste Creswell, KABAT CHAPMAN & OZMER LLP, Atlanta, Georgia, for Appellee/Cross-Appellant. ON BRIEF: Victor B. Maddox, FULTZ MADDOX DICKENS PLC, Louisville, Kentucky, Mary E. Eade, NEMES EADE PLLC, Louisville, Kentucky, for Appellants/Cross-Appellees. C. Celeste Creswell, Joseph W. Ozmer II, KABAT CHAPMAN & OZMER LLP, Atlanta, Georgia, Todd B. Logsdon, Megan R. U‘Sellis, Raymond C. Haley, FISHER & PHILLIPS LLP, Louisville, Kentucky, for Appellee/Cross-Appellant.
NALBANDIAN, Circuit Judge. This case is about promises made, promises broken, and disclaimers signed. And it is a reminder that not every broken promise occasions a legal remedy.
Plaintiffs1 sued Time Warner after it allegedly failed to makе good on oral promises of continued employment and better pay. The problem for Plaintiffs is that these promises conflicted with written disclaimers that each had signed.2 Through these disclaimers, Plaintiffs acknowledged they were at-will employees and would remain so unless they entered into written employment agreements. Plaintiffs now appeal the district court‘s grant of summary judgment to Time Warner on their claims of fraud, negligent misrepresentation, and promissory estoppel. Time Warner cross-appeals the district court‘s order sanctioning it under
We affirm the grant of summary judgment and reverse the sanctions.
I.
Plaintiffs first worked as “multi-dwelling unit” sales representatives (“MDU Reps“) for Insight Communications, Inc., a provider of cable, internet, and phone services. In that role, Plaintiffs sold Insight‘s services to apartment and condominium complexes in Louisville, Kentucky. It was a privileged role. All other sales representatives were “single-dwelling unit” sales representative (“SDU Reps“). Unlike MDU Reps, SDU Reps had to split their time going door-to-door, selling Insight‘s services to individual homeowners. These clients were less lucrative for Insight, which generally paid SDU Reps less than MDU Reps.
Time Warner acquired Insight in March 2012, and it allegedly reiterated its promises to Plaintiffs at various meetings it held with them the next year. So Plaintiffs claim they were shocked to learn in October 2013 that their workforce was being cut in half and that they would need to reapply if they wished to keep their positions. Those who could not keep their positions would be offered jobs as “Sweep Representatives,” which Plaintiffs regarded as an inferior, less well-paid position. Plaintiffs allege that Time Warner knew these changes would occur, even while it promised Plaintiffs better pay and continued employment.
Time Warner challenges this narrative by pointing out that it made no changes to Plaintiffs’ employment or compensation plan for more than eighteen months after the acquisition. It also notes that Plaintiffs electronically aсknowledged and accepted three different at-will employment disclaimers on or before the acquisition date. And it paints a very different picture of what it told Plaintiffs during the meetings it held with them the next year.
According to Time Warner, it informed Plaintiffs at these meetings that they could lose their jobs and that their compensation could decrease. At a meeting in August 2013, for example, Time Warner provided each Plaintiff a copy of a compensation plan that overhauled how they would earn commission going forward. The plan caused some Plaintiffs to complain that they would make less money and that Time Warner would need to reduce the number of MDU Reps. The plan also contained an at-will disclaimer that reminded Plaintiffs of their at-will status and cautioned that the plan “in no way implie[d] or guarantee[d] continued employmеnt.” (See R. 143-3, Commission Plan at PageID #4865.)
Plaintiffs then filed a motion for sanctions. Through that motion, Plaintiffs sought to exclude certain documents that, they argued, Time Warner had failed to timely disclose. These documents were Plaintiffs’ job offer letters. And they included one of the three types of at-will disclaimers that Plaintiffs electronically acknowledged on оr before the acquisition date. Plaintiffs also sought attorneys’ fees and expenses as an alternative sanction.
Although the magistrate judge concluded that the disclosure was untimely, she denied Plaintiffs’ motion because she found the belated disclosure harmless. Plaintiffs filed objections to the magistrate judge‘s decision, and the district court sustained those objections. As a remedy, the district court excluded the documents and awarded Plaintiffs their attorneys’ fees and costs related to the sanctions motion. Notwithstanding this order, the district court eventually granted Time Warner summary judgment on all of Plaintiffs’ claims.
Plaintiffs now appeal the district court‘s grant of summary judgment to Time Warner on their claims of fraud, negligent misrepresentation, and promissory estoppel. And Time Warner cross-appeals the court‘s sanctions order.
We first consider Plaintiffs’ summary-judgment аppeal, which we review de novo. Tysinger v. Police Dep‘t of Zanesville, 463 F.3d 569, 572 (6th Cir. 2006). Under this standard, we construe all facts and reasonable inferences in Plaintiffs’ favor. Id. If genuine issues of material facts remain, then summary judgment was improper. Id.
II.
Fraud and Negligent Misrepresentation. The district court construed Plaintiffs’ complaint as asserting both fraudulent misrepresentation and fraudulent omission. And it
We agree with the parties and the district court that reasonable reliance is an element of both fraudulent and negligent misrepresentation in Kentucky. See Flegles, Inc. v. TruServ Corp., 289 S.W.3d 544, 549 (Ky. 2009); Presnell Const. Managers, Inc. v. EH Const., LLC, 134 S.W.3d 575, 580 (Ky. 2004). But we are less certain that it is an element of fraudulent omission. We put that aside for now, however, and first explain why Plаintiffs cannot establish reasonable reliance and so their claims of negligent and fraudulent misrepresentation must fail.
In so doing, we rely on the same document that the district court relied on. It was one of the three documents that informed Plaintiffs of their at-will statuses on or before the acquisition date. And it was labeled an “Important Notice.” (R. 142-2, Important Notices at PageID #4579-88.) It stated: “You will be employed on an at-will basis unless you are subject to a written employment agreement signed by a company representative authorized to enter into an employment agreement.” Id.
Each Plaintiff electronically acknowledged “hav[ing] read and accepted the terms” of this notice. Id. And it is undisputed that Plaintiffs did so before they detrimentally relied on Time Warner‘s alleged promises of continued employment and better pay. So the issue here is whether it was reasonable for Plaintiffs to rely on Time Warner‘s promises of better pay and continued employment even though they had read and accepted this notice.
We hold it was not. On this issue, Kentucky law is clear: “[A]s a matter of law, a party may not rely on oral representations that conflict with written disclaimers to the contrary which the complaining party earlier specifically acknowledged in writing.” Rivermont Inn, Inc. v. Bass Hotels & Resorts, Inc., 113 S.W.3d 636, 640 (Ky. Ct. App. 2003).
The facts of Rivermont illustrate its rule (the “Rivermont Rule“). Rivermont Inn (“Rivermont“) wished to buy a Holiday Inn from MD Investments (“MD“), but the franchise was not transferrable. Id. at 639. So Rivermont began negotiating with Holiday Inn‘s parent company (“Holiday“) to obtain a franchise license. Id. During the application process,
Three days before the scheduled closing, Rivermont contacted one of Holiday‘s vice presidents, Judy Bloodworth, and asked whether it should proceed with the closing. Id. According to Rivermont, “Bloodworth told them that licensing would be forthcoming and to close on the property.” Id. So Rivermont went through with the closing. Id. After the closing, however, Holiday said it would only approve the franchise if Rivermont agreed to a condition: “[T]he hotel would not be on Holiday‘s national network until the [property-improvement plan] was completed to Holiday‘s satisfaction.” Id. Rather than accept the сondition, Rivermont sued Holiday, alleging fraud and promissory estoppel. See id. The trial court granted summary judgment to Holiday on each of Rivermont‘s claims, and the Kentucky Court of Appeals affirmed. Id. at 640, 643.
The Court of Appeals held that Rivermont‘s fraudulent misrepresentation claim failed for two reasons. First, it held that Rivermont could not establish fraudulent misrepresentation based on all the facts that Rivermont knew before it went through with the closing. Id. at 640. This included the fact that Holiday did not enter into oral agreements about licensing matters as specified in the written disclaimers. Id. For its second reason, the court articulated what we now refer to as the Rivermont Rule. Again, that rule prohibits a party from “rely[ing] on oral representations that conflict with written disclaimers to the contrary which the [] party earlier specifically acknowledged in writing.” Id. And the cоurt held that the rule barred Rivermont from relying on Bloodworth‘s oral representations as a matter of law. Id.
Here, all the Plaintiffs electronically acknowledged the Important Notice. The only question that remains is whether the Important Notice “conflict[ed]” with Time Warner‘s oral representations of continued employment and better pay. Id. We have no doubt that it did.
Plaintiffs’ reliance on Time Warner‘s promises of better pay fares no better. Kentucky law permits an employer to unilaterally modify the terms and conditions of an at-will employment relationship, prospectively, upon reasonable notice to the employee. See Landrum v. Lindsey Wilson Coll., No. 2003-CA-000971-MR, 2004 WL 362317, at *3 (Ky. Ct. App. Feb. 27, 2004) (unpublished) (citing Roshong v. American Saw & Tool Co., Inc., 244 S.W.2d 974 (Ky. 1951); Meyers v. Brown-Forman Distillery Co., 158 S.W.2d 407 (Ky. 1942)); see also Kimmel v. Progress Paint Mfg. Co., No. 2002-CA-000273-MR, 2003 WL 1226837, at *4 (Ky. Ct. App. Jan. 10, 2003) (unpublished). So the Important Notice informed each Plaintiff that Time Warner could unilaterally modify his or her future pay after giving reasonable notice. It follows that the company‘s oral promises of better or similar pay directly conflicted with this disclaimer.
A useful illustration of the Rivermont Rule applied to the at-will employment context appears in Turner v. Leggett & Platt, Inc., No. 5:08-CV-00113-TBR, 2010 WL 1049849 (W.D. Ky. Mar. 19, 2010). There, the employer had promised the employee a “long career” and that he would have a job until his division was sold. Id. at *1-2. But the company discharged the employee before it sold the division. Id. at *3. The employee sued, alleging fraud, promissory estoppel, and other claims. Id. But the court applied the Rivermont Rule and held that the employee could not rely on those representations because they conflicted with written, at-will disclaimers that he had signed. See id. at *7.
None of the cases that Plaintiffs substantially rely on are to the contrary. In their opening brief, Plaintiffs assert that these cases provide the “substantive rule of decision in this case:”
Switching strategies in their reply brief, Plaintiffs argue that disclaimers may be relevant but are never dispositive of reasonable reliance. But the case they rely on for that proposition contradicts their position. See Radioshack Corp. v. ComSmart, Inc., 222 S.W.3d 256, 262 (Ky. Ct. App. 2007). In Radioshack, the court held that the plaintiffs could not reasonably rely on the defendant‘s oral representations regarding a matter that was covered by the parties’ franchise agreement. Id. This was because the parties’ franchise agreement “specifically disclaimed any oral understandings or agreements which were not set out in the written contract.” Id.
Similarly, here the Important Notices stated that Plaintiffs would be “employed on an at-will basis unless [they were] subject to a written employment agreement signed by a company reprеsentative authorized to enter into an employment agreement.” (See R. 142-2, Important Notices at PageID #4579-88 (emphasis added).) In other words, the Important Notices “specifically disclaimed any oral understanding or agreements” affecting Plaintiffs’ at-will employment statuses. Radioshack, 222 S.W.3d at 262. Plaintiffs are thus barred from relying on such understandings or agreements to show reasonable reliance.
It is true that Radioshack also said that “written disclaimers do not preclude a tort action for misrepresentation.” Id. But that is not inconsistent with the Rivermont Rule. Rivermont never said that written disclaimers preclude a misrepresentation claim per se. Rivermont held that a plaintiff may not establish reasonable reliance where the disclaimers conflict with subsequent oral representations. Rivermont, 113 S.W.3d at 640. Indeed, Radioshack cited Rivermont in holding that the defendant‘s oral promise was “not actionable” because, like the promises here, it conflicted with the parties’ written agreement. See Radioshack, 222 S.W.3d at 262.
Fraudulent Omission. We return to the issue we set aside earlier: Whether reasonable reliance is an element of fraudulent omission under Kentucky law. If it is (as both parties assume), our analysis is straightforward given we have already held that Plaintiffs cannot establish reasonable reliance.
The Kentucky Court of Appeals has at times suggested that it is. See Pal Oil, LLC v. United Am. Energy, LLC, No. 2011-CA-000744-MR, 2012 WL 5274652, at *30 (Ky. Ct. App. Oct. 26, 2012) (unpublished) (“In the context of fraud, Kentucky law prohibits [the plaintiff] from claiming that it reasonably relied upon any oral representation or supposed omission that conflicts with [a written] disclaimer to the contrary which [the plaintiff] earlier specifically acknowledged in writing.“) (emphasis added) (citing Rivermont, 113 S.W.3d at 640-41); Martinez v. Bruner Land Co., Inc., No. 2014-CA-001312-MR, 2016 WL 6543626, at *6 (Ky. Ct. App. Nov. 4, 2016) (unpublished) (explaining that the “operative question” in a fraudulent-omission claim was “whether [the claimant] reasonably relied on the lack of [] undisclosed information to her detriment“) (emphasis added).
But neither the Kentucky Supreme Court nor the Kentucky Court of Appeals has explicitly said that reasonable reliance is an element of fraudulent omission. Both courts define the elements of fraudulent omission as: “(1) the defendant had a duty to disclose the material fact at issue; (2) the defendant failed to disclose the fact; (3) the defendant‘s failure to disclose the material fact induced the plaintiff to act; and (4) the plaintiff suffered actual damages as a сonsequence.” Yung v. Grant Thornton, LLP, 563 S.W.3d 22, 45 n.27 (Ky. 2018) (quoting Giddings & Lewis, Inc. v. Indus. Risk Insurers, 348 S.W.3d 729, 747 (Ky. 2011)); accord Rivermont, 113 S.W.3d at 641.
(1) the defendant made a material representation to the plaintiff; (2) the representation was false; (3) the defendant knew the representation to be false or made it with reckless disregard for its truth or falsity; (4) the defendant intended to induce the plaintiff to act upon the misrepresentation; (5) the plaintiff reasonably relied upon the misrepresentation; and (6) the misrepresentation caused injury to the plaintiff.
Giddings & Lewis, 348 S.W.3d at 747 (emphasis added) (citing Flegles, Inc. v. TruServ Corp., 289 S.W.3d 544, 549 (Ky. 2009)); accord Rivermont, 113 S.W.3d at 640.
The distinction appears to be academic. If a defendant‘s failure to disclose a material fact induces the plaintiff‘s detrimental reliance, and the defendant owed the plaintiff a duty to disclose the material fact, the plaintiff‘s reliance may be characterized as reasonable. But we must also be mindful of the Kentucky Supreme Court‘s statement that “[f]raud by omission is not the same, at law, as fraud by misrepresentation, and has substantially different elements.” Giddings & Lewis, 348 S.W.3d at 747 (quoting Rivermont, 113 S.W.3d at 641).3
Regardless, it turns out not to affect the bottom line here. In Rivermont, the disclaimers did not just prohibit Rivermont from relying on Holiday‘s oral representations. The disclaimers also meant that Holiday did not have a duty to disclose that it intended to place a condition on its approval of Rivermont‘s franchise. Rivermont, 113 S.W.3d at 641-42. The court reasoned that Holiday would have only owed Rivermont that duty if Holiday “ha[d] partially disclosed material facts to [Rivermont] but created the impression of full disclosure.” Id. at 641 (citing Dennis v. Thomson, 43 S.W.2d 18 (Ky. 1931)).4 But Rivermont could not make that showing because of what it had acknowledged in writing—that Holiday would not “enter into oral agreements with respect to the grаnting of a license.” Id. Rivermont was thus unable to
The same is true here. Plaintiffs had already acknowledged in writing that they were at-will employees when Time Warner promised them continued employment and better pay. As a result, they cannot show that Time Warner withheld “material facts [from them] but created the impression of full disclosure.” Id. at 641. Their fraudulent-omission claim therefore fails.
Promissory Estoppel. We next consider Plaintiffs’ promissory-estoppel claim, and we take this opportunity to clarify some confusion within our circuit. The district court “conclude[d] that reasonable reliance is not a required element of promissory estoppel” but granted summary judgment on other grounds. (R. 195, Summ. J. Op. and Order at PageID #6206.) The Plaintiffs likewise take the position that reasonable reliance is not an element of promissory estoppel. Although Time Warner argues thаt the better view of Kentucky law is that reasonable reliance is an element of the claim, it acknowledges that the issue is the subject of “some debate.” (Time Warner‘s Resp. Br. at 44.) That is perhaps unsurprising considering we have stated, in dicta, that Kentucky law “is unsettled on this issue.” Ashland, Inc. v. Oppenheimer & Co., 648 F.3d 461, 472 (6th Cir. 2011).
Ashland‘s dictum was based on TWB Distribution, LLC v. BBL, Inc., No. 3:08-CV-509-S, 2009 WL 5103604 (W.D. Ky. Dec. 17, 2009). In TWB Distribution, the court surveyed Kentucky caselaw and observed that every court, Kentucky or federal, to squarely confront the issue had indicated that reasonable reliance was an essential element of promissory estoppel. Id. at *6 (citing Rivermont, 113 S.W.3d at 640-41; Fletcher v. Branch Banking & Trust Corp., No. 3:04CV-339-H, 2007 WL 2792186 (W.D. Ky. Sept. 21, 2007); Butler v. Progressive Cas. Ins. Co., No. 5:04CV-41-R, 2005 WL 1009621 (W.D. Ky. April 25, 2005)).
But the TWB Distribution court also noted that although the Kentucky Supreme Court had not directly confronted the issue, it had articulated the elements of promissory estoppel in two cases. Id. at *5. And both times it adopted the Restatement (Second) of Contracts’ definition:
A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.
Sawyer v. Mills, 295 S.W.3d 79, 89 (Ky. 2009) (quoting Meade Const. Co. v. Mansfield Commercial Elec., Inc., 579 S.W.2d 105, 106 (Ky. 1979)); accord Restatement (Second) of Contracts § 90 (Am. Law Inst. 1981).
As the TWB Distribution court explained, the commentary of the Restatement advises that “the . . . requirement [that enforcement be necessary to avoid injustice] may depend on the reasonableness of the promisee‘s reliance.” TWB Distribution, 2009 WL 5103604, at *5 (alterations in original and emphasis added) (quoting Restatement (Second) of Contracts § 90 cmt. b). The court took from that statement that reasonable reliance could be but was not necessarily an element of the Restatement definitiоn. Id. For the court, it followed that reasonable reliance was not necessarily an element of promissory estoppel in Kentucky. Id.
But the court overlooked what was right in front of it. The Restatement definition itself requires the promise be “reasonably expect[ed] to induce action or forbearance on the part of the promisee.” Restatement (Second) of Contracts § 90(1) (emphasis added). In other words, the promisee‘s reliance—the “action or forbearance“—must be “reasonabl[e].” Id. Reasonable reliance is therefore a stand-alone element of promissory estoppel under the Restatement definition.
That reading is supported by reams of authority. In fact, the Kentucky Court of Appeals has required proof of reasonable reliance in cases where it has apрlied the Restatement definition. See McCarthy v. Louisville Cartage Co., 796 S.W.2d 10, 12 (Ky. Ct. App. 1990) (holding that an employer was not entitled to a directed verdict where “[t]he employer [could] reasonably foresee that [the employee‘s] continuation in employment ha[d] been induced“); see also Hyatt Corp. of Delaware v. Young & Assocs., Inc., No. 2004-CA-002233-MR, 2005 WL 3004744, at *5 (Ky. Ct. App. Nov. 10, 2005) (unpublished).
Our circuit and several of our sister circuits have done the same when applying the Restatement definition. See, e.g., Andersons, Inc. v. Consol, Inc., 348 F.3d 496, 503 (6th Cir. 2003) (construing Ohio law); Kirklin v. Joshen Paper & Packaging of Arkansas Co., 911 F.3d 530, 537 (8th Cir. 2018) (construing Arkansas law); Rockwood v. SKF USA Inc., 687 F.3d 1, 13 (1st Cir. 2012) (construing New Hampshire and Pennsylvania law); Garwood Packaging, Inc. v. Allen & Co., 378 F.3d 698, 701 (7th Cir. 2004) (construing Indiana law).
And two classic treatises on contracts agree: Both acknowledge the enduring influence of the Restatement on the development of promissory estoppel under state common law. See 4 Samuel Williston & Richard A. Lord, Williston on Contracts § 8:5, at 101-17 (4th ed. 2008); 3 Eric Mils Holmes & Joseph M. Perillo, Corbin on Contracts § 8.10, at 35-38 (1996).5 And both acknowledge that the Restatement definition requires proof of reasonable reliance. See Williston & Lord, supra, at 137-38 (“[B]oth versions of the Restatement recognize that . . . a promise might be enforced despite the absence of consideration . . . based on the promisee‘s foreseeable, reasonable, justified and detrimental reliance on the promise.“); Holmes & Perillo, supra § 8.9, at 29 (“[The] ‘promise’ must reasonably be expected to and does in fact induce reаsonable reliance.“).
This is all to say that the Kentucky Supreme Court‘s adoption of the Restatement definition only confirms what every court to directly confront the issue has already indicated: Reasonable reliance is a “key element” of promissory estoppel in Kentucky. Rivermont,
For these reasons, we affirm the district court‘s grant of summary judgment to Time Warner. Now we turn to Time Warner‘s cross-appeal.
III.
Time Warner argues that the district court abused its discretion in sustaining Plaintiffs’ objections to the magistrate judge‘s sanctions order. That order had denied Plaintiffs’ sanctions motion, which sought to prevent Time Warner from introducing Plaintiffs’ offer letters into evidence. The offer letters were among the three types of documents containing an at-will disclaimer that Plaintiffs electronically acknowledged on or before the acquisition date. Each document stated:
Your employment with TWC is at-will, meaning either you or TWC can terminate employment, with or without prior notice, at any time for any reason not prohibited by law. Nothing in this letter is intended to create a contract for employment, guarantee of continued employment with TWC, or guarantee of any particular compensation or benefit level. This at-will relationship may not be modified except by individual written agreement signed by you and an officer of TWC. TWC reserves the right to change the terms and conditions of your employment, with or without notice to you, at any time for any reason not prohibited by law. This letter constitutes the full terms and conditions of your employment with TWC. It supersedes any other oral or written promises that may have been made to you.
(See, e.g., R. 153-1, Bisig Offer Letter at PageID #5521.)
Time Warner did not disclose these offer letters to Plaintiffs until nearly two and a half years into the litigation and two weeks before the close of discovery. Naturally, Plaintiffs argued that Time Warner violated its duty to include these documents as part of its initial disclosures under
In its defense, Time Warner argued that the production was not untimely under
The magistrate judge denied Plaintiffs’ request for sanctions. Although the judge concluded that the disclosure was not timely, it also concluded that the disclosure was harmless.7
Time Warner advances five arguments on appeal for why, in its view, the district court abused its discretion: (1) The court improperly sustained Plaintiffs’ objections to the magistrate judge‘s order based on arguments “not fairly presented to the magistrate judge“; (2) the court incorrectly concluded that the magistrate judge failed to apply Howe; (3) the court applied the wrong standard in reviewing the magistrate judge‘s decision; (4) the magistrate judge‘s decision was neither clearly erroneous nor contrary to law; and (5) the court improperly failed to make a “bad faith” finding before imposing monetary sanctions under its inherent power.
We disagree with Time Warner‘s first argument but agree with its next three arguments. And because we reverse the monetary sanctions on other grounds, we hold that its last argument is moot.
IV.
We review a district court‘s decision to impose
The Parties Presented Howe to the Magistrate Judge. Time Warner first argues that the district court should not have considered Plaintiffs’ objections because they never mentioned Howe in their motion for sanctions or reply. We disagree that Plaintiffs were under any obligation to do so.
In Murr v. United States, 200 F.3d 895 (6th Cir. 2000), we noted that parties are precluded from raising “new arguments or issues that were not presented to the magistrate.” Id. at 902 n.1. But even a cursory review of the record confirms that such was not the case here. Although Plaintiffs did not explicitly mention Howe in their sanctions motion, they argued that Time Warner‘s violation was not harmless. And in responding to Plaintiffs’ motion, Time Warner explicitly argued how each factor of Howe weighed in its favor. Plaintiffs’ reply brief, in turn, responded to at least a few of Time Warner‘s Howe-based arguments. The record is thus clear that the parties fairly presented Howe‘s test for harmlessness “to the magistrate.” Murr, 200 F.3d at 902 n.1.
The Magistrate Judge Applied Howe. Time Warner next argues that the district court erred in concluding that the magistrate judge failed to apply Howe.
Under
The five factors that we consider under Howe are:
(1) the surprise to the party against whom the evidence would be offered; (2) the ability of that party to cure the surprise; (3) the extent to which allowing the evidence would disrupt the trial; (4) the importance of the evidence; and (5) the nondisclosing party‘s explanation for its failure tо disclose the evidence.
Howe v. City of Akron, 801 F.3d 718, 748 (6th Cir. 2015) (quoting Russell v. Absolute Collection Servs., Inc., 763 F.3d 385, 396-97 (4th Cir. 2014)).
The magistrate judge considered nearly each of these factors, as we explain below. But first, a word of caution: “District courts have broad discretion in applying these factors and need not apply each one rigidly. The factors simply lend themselves to the task at the heart of
Turning to Howe‘s first factor—surprise to the party—the magistrate judge found that it weighed in Time Warner‘s favor. The judge concluded that the disclosure did not surprise Plaintiffs because they had already received and acknowledged the offer letters during the onboarding process. Time Warner had also produced sсreenshots of the onboarding process—
The judge found that the second factor—ability to cure—also weighed in Time Warner‘s favor. He noted, for example, that Plaintiffs neither moved for additional discovery nor moved to extend the discovery deadline. Moreover, they “made no effort whatsoever to make use of these critical documents” during their deposition of Time Warner‘s corporate reprеsentative. Id. at 5802. And this was despite them receiving the documents—barely two pages per Plaintiff—roughly two weeks before that deposition.
The judge did not explicitly analyze the third factor—disruption to trial. He may have simply inferred from Plaintiffs’ unwillingness to cure that there would be no disruption. After all, the parties had had not yet even scheduled trial. We do not find this omission to be fatal in any event because judges need not apply Howe‘s factors “rigidly.” Bentley, 2016 WL 5867496, at *10.
As for the fourth factor—importance of the evidence—the magistrate judge found that the documents were “highly essential” and “on their face contain[ed] obviously critical employment terms.” (R. 168, Magis. Judge‘s Sanction‘s Order at PageID #5795.) On its own, this factor can cut both ways. “The more important the proof, the greater the effect of preclusion, but also the greater the harm in tardy disclosure.” EQT Prod. Co. v. Magnum Hunter Prod., Inc., No. 5:16-CV-150-JMH-REW, 2017 WL 2295906, at *5 (E.D. Ky. May 25, 2017). But the judge appeared to weigh this factor in Time Warner‘s favor because Plaintiffs made no efforts to cure their surprise.
The judge found that the fifth and final factor—the non-disclosing party‘s explanation—favored Plaintiffs. The judge concluded that “[a] reasonable person simply could not accept that such critical documents were overlooked for so long.” (R. 168, Magis. Judge‘s Sanction‘s Order at PageID #5800.)
The District Court‘s Standard of Review. The district court‘s previous error gave way to its next error: reconsidering the magistrate judge‘s harmlessness determination de novo.9 In analyzing the Howe factors anew, the district court found that four of Howe‘s factors favored Plaintiffs and only one factor favored Time Warner. It therefore sustained Plaintiffs’ objections.
We already noted that the “clearly erroneous or contrary to law” standard of
That said, we do not read
With this approach in mind, we hold that a district court should review a magistrate judge‘s determination of harmlessness under
The District Court—Not the Magistrate Judge—Abused Its Discretion. As discussed, the magistrate judge adequately considered at least four of the five Howe factors. And it appropriately found that Time Warner‘s disclosure was harmless considering that at least three of the five factors weighed in Time Warner‘s favor. So the district court had no basis to conclude that the magistrate judge abused its discretion. It was instead the district court that abused its discretion in (1) erroneously concluding that the magistrate judge failed to apply Howe and (2) reconsidering the magistrate judge‘s decision while applying the wrong standard of review. See Stough v. Mayville Cmty. Sch., 138 F.3d 612, 614 (6th Cir. 1998) (“A district court abuses its discretion when it . . . improperly aрplies the law[] or uses an erroneous legal standard.“).
Because we have already ruled in Time Warner‘s favor on Plaintiffs’ summary judgment appeal, we have no need to reverse the district court‘s exclusion of Plaintiffs’ offer letters. But the court based its decision to order monetary sanctions entirely on its reasons for excluding the letters. And the court should have let the magistrate judge‘s decision stand, including the denial
For these reasons, we affirm the district court‘s grant of summary judgment to Time Warner. And we reverse the court‘s award of attorneys’ fees and costs to Plaintiffs.