Opinion
No. 1 CA-SA 12-0129
07-19-2012
YOKOHAMA TIRE CORPORATION, and YOKOHAMA RUBBER COMPANY, Ltd., Petitioners, v. THE HONORABLE LAWRENCE C. KENWORTHY, and THE HONORABLE MARK WAYNE REEVES, Judges of the SUPERIOR COURT OF THE STATE OF ARIZONA, in and for the County of YUMA, Respondent Judges, ALFREDO TALAMANTES and ELIZABETH TALAMANTES, individually and as legal guardians of ADRIAN TALAMANTES, a minor, and MARIA DE LA LUZ MARTINEZ ORTIZ, Individually, and as the statutory representative under A.R.S. § 12-612 and on behalf of MANUEL ORTIZ, SANDRA ORTIZ, BENITO ORTIZ, VERONICA ORTIZ, EZEQUIEL ORTIZ, LEONEL ORTIZ, ALONSO ORTIZ and MARTIN ORTIZ, the surviving children of FILIMON ORTIZ, Real Parties in Interest.
Yuma County
Superior Court
No. S1400CV200901305
DECISION ORDER
Yokohama Tire Corporation and Yokohama Rubber Company (collectively, "Yokohama") seek special action review of certain discovery sanctions imposed by the superior court. We declined to review the underlying discovery order issued in August 2011. See Cicoria v. Cole, 222 Ariz. 428, 430, ¶ 8, 215 P.3d 402, 404 (App. 2009). We retained for consideration three aspects of the sanctions order: (1) the propriety of the $100,000 sanction payable to the court; (2) the need for a hearing to determine culpability as between Yokohama and its retained counsel for the discovery violations found by the court; and (3) whether the court erred by striking most of Yokohama's affirmative defenses.
We review discovery sanctions for an abuse of discretion. Wayne Cook Enter., Inc. v. Fain Props. Ltd. P'ship, 196 Ariz. 146, 147, ¶ 5, 993 P.2d 1110, 1111 (App. 1999) (citations omitted). "A court abuses its discretion if it commits an error of law in reaching a discretionary conclusion, it reaches a conclusion without considering the evidence, it commits some other substantial error of law, or 'the record fails to provide substantial evidence to support the trial court's finding.'" Flying Diamond Airpark, L.L.C. v. Meienberg, 215 Ariz. 44, 50, ¶ 27, 156 P.3d 1149, 1155 (App. 2007) (quoting Grant v. Ariz. Pub. Serv. Co. , 133 Ariz. 434, 456, 652 P.2d 507, 529 (1982)).
The imposition of discovery sanctions "must be appropriate to the circumstances and must be preceded by due process." Roberts v. City of Phoenix, 225 Ariz. 112, 119-20, ¶ 27, 235 P.3d 265, 273 (App. 2010) (citation omitted). The more serious the sanction, "the more process is due." Precision Components, Inc. v. Harrison, Harper, Christian & Dichter, P.C. , 179 Ariz. 552, 557, 880 P.2d 1098, 1103 (App. 1993) (quoting Donaldson v. Clark, 819 F.2d 1551, 1561 (11th Cir. 1987)). Although sanctions for discovery abuses are mandated:
[T]hose sanctions must be appropriate, and they must be preceded by due process. The sanction that is appropriate and the process that is due depends on the circumstances and the exercise of trial court discretion. The heavier the sanction contemplated, the more deliberate the process that is due and the more thorough the findings that should be made.Montgomery Ward & Co. v. Superior Court (Stover), 176 Ariz. 619, 622, 863 P.2d 911, 914 (App. 1993) (interpreting sanctions under former Rule 26.1(g), Arizona Rules of Civil Procedure).
The sanctions order at issue here may be fairly characterized as severe, triggering heightened due process protections and enhanced scrutiny of the trial court's exercise of discretion. See Precision Components, 179 Ariz. at 557, 880 P.2d at 1103 (considering the severity of sanctions, "both in terms of their absolute magnitude and in relation to the actual expenditures in the case").
Respondents correctly note that most Arizona appellate decisions discuss the need for a hearing to determine culpability for discovery violations in the context of orders that strike pleadings or preclude a party from presenting evidence. We do not, however, read the cases as foreclosing the need for a hearing when the sanctions imposed substantially impair a party's ability to prosecute or defend. As we discuss infra, the order at issue here appears to have that effect.
Moreover, the trial court specifically undertook to adjudicate whether Yokohama, its employees, or outside counsel was culpable. It concluded that "in house counsel" Roy Goto was responsible for responding to the August 2011 order and that the discovery violations were "not the fault of outside counsel." Yokohama, though, avowed that Goto was "private counsel" retained to assist with discovery. Because the record before us does not support a finding that Goto was Yokohama's employee, we cannot conclude that the trial court properly determined fault for the discovery-related misconduct. We also cannot discern whether the court's conclusion about Goto's status affected the court's sanctions order in other respects.
The superior court also ordered Yokohama to pay it $100,000. Courts may sanction parties who fail to comply with discovery orders and may require the party, counsel, or both, to pay "reasonable expenses, including attorney's fees" occasioned by the non-compliance. Ariz. R. Civ. P. 37(b). Sanctions payable to the court may be appropriate, particularly if the court has been forced to devote an unreasonable amount of time to resolving a discovery dispute.
However, where there is no obvious nexus between the discovery-related misconduct and the monetary sanction, it is incumbent on the court to make findings or offer some rationale for the sanction in order to permit meaningful appellate review. This is especially so where, as here, the amount is sizeable. See Roberts, 225 Ariz. at 119-20, ¶ 27, 235 P.3d at 273 (sanctions must be "appropriate to the circumstances"); cf. Wilson v. Volkswagen of Am. , Inc. , 561 F.2d 494, 505 (4th Cir. 1977) ("And since every exercise of judicial discretion 'must find its basis in good reason,' the Trial Court, when granting such sanction, 'should clearly state its reasons so that meaningful review may be had on appeal.'"); Carlucci v. Piper Aircraft Corp. , 775 F.2d 1440, 1453 (11th Cir. 1985) (imposition of $10,000 fine on attorney who acted in bad faith during discovery was deficient because court failed to detail how it arrived at that sum). The amount at issue is also significantly greater than Respondents requested and considerably more than the sanctions at issue in the cases cited by Respondents. See Freiria Trading Co. v. Maizoro, 187 F.R.D. 47, 49 (D. Puerto Rico 1999) ($500 fine paid to court as sanction to deter attorney neglect of court obligations); United States v. Shaffer Equip. Co., 158 F.R.D. 80, 88 (S.D. W.V. 1994) ($2,000 and $2,500 sanctions); Pereia v. Narragansett Fishing Corp., 135 F.R.D. 24, 27 (D. Mass 1991) ($2,500 sanction paid to court for disobedience of orders and $550 to opposing counsel for costs).
We do not foreclose the possibility that a monetary sanction is appropriate here. As it stands, though, no rational link is apparent from the record between the monetary penalty imposed and the recognized purposes of discovery sanctions. We are not faced with a question of making opposing parties whole. The superior court also ordered Yokohama to pay Respondents' attorneys' fees incurred in litigating the discovery issue -- an order we do not disturb.
Finally, the superior court struck all but three of Yokohama's affirmative defenses. Trial courts have broad discretion to impose "just" sanctions for discovery violations, including "[a]n order refusing to allow the disobedient party to support or oppose designated claims or defenses." Ariz. R. Civ. P. 37(b) (2)(B). However, "[w]henever possible, procedural rules should be interpreted to maximize the likelihood of a decision on the merits." Allstate Ins. Co. v. O'Toole, 182 Ariz. 284, 287, 896 P.2d 254, 257 (1995) (citation omitted).
The court struck "each and every affirmative defense in Defendant's Answer except those relating to spoliation, safety restraints and punitive damages." The stricken defenses include statute of limitations; federal preemption; comparative fault and contributory negligence of third parties; plaintiffs' comparative fault; assumption of the risk; failure to properly maintain, operate and care for the vehicle and tires; a defect that arose after the initial retail sale; state of the art; and negligence per se for driving in excess of the posted speed limit.
As noted supra, the effect of the sanctions order appears to significantly impair, if not gut, Yokohama's ability to defend itself. The order can be read to prevent Yokohama from presenting evidence about the condition of the subject vehicle and its tires, as well as the factual circumstances leading up to the accident. This becomes the functional equivalent of a default judgment in many respects, making more imperative the need for an evidentiary hearing and a precise, tailored, considered response to the discovery violations that maintains, if possible, resolution of this case on its substantive merits.
The order states: "Without the documents and records Defendant has refused to provide, Plaintiff could not reasonably be expected to prove either the existence of a defect or causation, or properly respond to Defendant's affirmative defenses." But some of Yokohama's defenses allege conduct by the plaintiffs that appears unrelated to the missing items of discovery.
We say "if possible" because, should the trial court determine after a hearing that lesser sanctions will not achieve compliance, orders limiting or striking Yokohama's defenses may be appropriate.
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CONCLUSION
We accept special action jurisdiction and grant relief by directing the superior court to conduct further proceedings to: (1) determine whether Yokohama, its counsel, or both, are at fault for the discovery violations; (2) consider whether a monetary sanction payable to the court remains appropriate and, if so, to articulate the rationale for the amount imposed; and (3) reconsider and/or clarify the scope of its order striking Yokohama's affirmative defenses. We deny Respondents' request for attorneys' fees pursuant to Arizona Revised Statutes section 12-349.
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MARGARET H. DOWNIE
Presiding Judge
CONCURRING: _______________
PHILIP HALL, Judge
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RANDALL M. HOWE, Judge