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Pipeline Productions, Inc. v. The Madison Companies, LLC

United States District Court, D. Kansas

May 7, 2019

PIPELINE PRODUCTIONS, INC., et al., Plaintiffs and Counterclaim Defendants,
v.
THE MADISON COMPANIES, LLC, et al., Defendants and Counterclaimants.

          MEMORANDUM AND ORDER

          ANGEL D. MITCHELL U.S. MAGISTRATE JUDGE

         This matter comes before the court on Plaintiffs' Motion for Sanctions for Defendants' Violation of Discovery Orders and Failure to Timely Correct False Discovery Responses (ECF No. 462). Plaintiffs Pipeline Productions, Inc., Backwood Enterprises, LLC, OK Productions, Inc., and Brent Mosiman (collectively “Pipeline”) seek sanctions because The Madison Companies, LLC and Horsepower Entertainment, LLC (collectively “Madison”) untimely produced what Pipeline suggests is a key document-a draft consulting agreement. As explained below, the court finds Madison committed multiple discovery violations, but Pipeline is not entitled to most of the sanctions it seeks. Instead, the court will consider the possibility of allowing limited additional discovery and will award Pipeline its reasonable attorneys' fees and costs incurred in filing the instant motion. Accordingly, Pipeline's motion is granted in part and denied in part.

         I. RELEVANT BACKGROUND

         The case arises out of the parties' business dealings relating to the Thunder on the Mountain country music festival (“Thunder”) in 2015. According to the Complaint, Pipeline is a well-known producer of live music festivals, including Thunder. Madison is a venture capital firm that was looking to invest in Pipeline's music festival business. The parties engaged in business dealings leading up to the then-planned Thunder festival in 2015. Shortly before the festival was scheduled to occur, those business dealings fell through. This lawsuit centers around whether, when, and the extent to which the parties incurred legally binding obligations to one another before the deal fell through. Pipeline asserts claims for breach of contract, breach of fiduciary duty, fraud, and tortious interference. Madison seeks a refund of the money it advanced for Thunder 2015.

         As relevant to the current dispute, Pipeline alleges that, after the Thunder deal fell apart, Madison hired away key Pipeline partners, employees, and agents to drive Pipeline out of business. One of these key individuals was Nathan Prenger. Pipeline's motion for sanctions stems from Madison's untimely production of a draft “Consulting Agreement” between Mr. Prenger and Horsepower for work on the Kaaboo Del Mar music festival (“the draft agreement”). A Madison consultant emailed the draft agreement to Mr. Prenger on May 29, 2015. (Defs.' Ex. 4 at 2, ECF No. 472-4.) The draft agreement is not executed by Mr. Prenger or Horsepower.

         Pipeline contends the draft agreement is responsive to its Request for Production (“RFP”) No. 9. It sought “[d]ocuments reflecting communications and/or negotiations between Defendants and/or related entities and individuals that previously worked for Plaintiffs and/or related entities regarding potential employment.” This RFP was previously the subject of a motion to compel. On June 20, 2018, U.S. Magistrate Judge K. Gary Sebelius directed Madison to produce documents responsive to this RFP No. 9. See Pipeline Prods., Inc. v. Madison Cos., LLC, No. 15-4890-KHV, 2018 WL 3055869, at *8 (D. Kan. June 20, 2018).

         Pipeline also contends the draft agreement is responsive to RFP No. 24. It sought “all contracts . . . and/or drafts thereof by and between Defendants and Nate Prenger.” Madison served its response to this RFP No. 24 on September 6, 2018. That response stated that “there are no responsive documents.”

         Discovery closed on December 31, 2018. Madison produced the draft agreement on January 31, 2019. Pipeline first brought the issue of the belatedly produced draft agreement to the court's attention immediately before the reconvened final pretrial conference on April 16, 2019. At that conference, the court directed the parties to submit briefing on this matter. (ECF No. 457.)

         Pipeline now moves for sanctions under Rules 26(g), 37(b)(2)(A)(i) and (ii), and 37(c) of the Federal Rules of Civil Procedure. Pipeline asks the court to sanction Madison because it failed to timely (1) comply with Magistrate Judge Sebelius's June 20 order compelling Madison to produce documents responsive to RFP No. 9, and (2) supplement or correct its response to RFP No. 24. Pipeline asks that the court impose the following sanctions: (1) allow Pipeline to file an amended complaint adding claims against the Kaaboo entities (which, as explained below, are related to Madison) and reopen discovery on the newly added claims; (2) declare it established that Madison and Kaaboo tortiously interfered with Pipeline's business and prevent them from defending against this claim; and (3) award Pipeline its attorneys' fees and expenses incurred in preparing this and other motions.

         II. MADISON COMMITTED DISCOVERY VIOLATIONS

         The record before the court establishes that Madison committed at least two and possibly three discovery violations. First, Madison's untimely production of the draft agreement violated Judge Sebelius's June 20 order granting Pipeline's motion to compel as to RFP No. 9. Madison did not produce the draft agreement until January 31, 2019, a month after discovery closed. Madison does not dispute that it violated the court's order, and instead tries to sidestep this issue by focusing its arguments on the fact that Pipeline is not entitled to the sanctions it has requested- essentially, a “no harm, no foul” argument. The court is persuaded that Madison failed to comply with the court's order compelling discovery, particularly given the lack of any explanation to justify the belated production. This triggers sanctions under Rule 37(b)(2).

         Madison committed another discovery violation when it responded to RFP No. 24 by incorrectly stating that no responsive documents existed and/or when it failed to timely supplement that response once it learned that information was incorrect. Contrary to Madison's representation in its response to RFP No. 24, a draft agreement existed that was responsive to the request. This constituted a violation of Rule 26(g)(1) if Madison knew that its response to RFP was incorrect or deficient at the time of service, triggering sanctions under Rule 26(g)(3). But regardless of whether Madison knew its response was incorrect at the time, Madison also failed to timely supplement this discovery response once Madison learned the response was incorrect. This constituted a violation of Rule 26(e). Based on the record, it is not clear whether Madison violated Rule 26(g)(1) or 26(e), or both-largely because Madison does not offer any explanation for this incorrect response. Instead, Madison attempts to excuse this violation by pointing out (in a footnote, no less) that RFP No. 24 was not subject to a court order compelling discovery. (ECF No. 472 n.3.) But this argument misses the mark. Madison was obliged to submit accurate discovery responses and, once it learned that the discovery response was incorrect, to timely supplement the incorrect discovery response pursuant to Rule 26(e). See, e.g., EEOC v. Dogencorp, LLC., 196 F.Supp.3d 783, 796, (E.D. Tenn. 2016) (noting that courts are likely to determine that a party violates Rule 26(e) when a party supplements disclosures or responses after the discovery deadline).

         III. SANCTIONS

         The court next considers the types of sanctions Pipeline seeks. When a discovery violation occurs, the district court has discretion to determine the appropriate sanction, provided the sanction is both just and related to the particular claim at issue. Proctor & Gamble Co. v. Haugen, 427 F.3d 727, 738 (10th Cir. 2005). In making this determination, the court must be mindful of the purposes for sanctions, which include: “(1) deterring future litigation abuse, (2) punishing present litigation abuse, (3) compensating victims of litigation abuse and (4) streamlining court dockets and facilitating case management.” White v. Gen. Motors Corp.,908 F.2d 675, 683 (10th Cir. 1990) (considering Rule 11 sanctions); see also Unites States v. Perea, No. 08-20160-08-KHV, 2010 WL 11583172, at *5 n.13 (D. Kan. Jan. 7, 2010) (“While White ...


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