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The entry of default judgment as a discovery sanction is severe, and rare.  But the Ninth Circuit recently affirmed a district court’s order striking a defendant’s answer and proceeding to trial on damages only in a certified class as a sanction for repeated discovery violations. The jury returned a damages verdict of $4,509,268, which, after including interest and costs, became a judgment of $5,270,230.06.

The plaintiffs in <a title="Hester v. Vision Airlines, Inc." href="http://www.ca9.uscourts.gov/opinions/view_subpage.php?pk_id=0000012363"><em>Hester v. Vision Airlines, Inc.</em></a>, No. 11-15656, 2012 U.S. App. LEXIS 14683 (9<sup>th</sup> Cir. Jul. 18, 2012), sued in the District of Nevada to collect “hazard pay” they claimed the defendant was required to pay pilots and flight crews under the defendant’s contract with the United States to provide aircraft and crews to deliver supplies to Iraq and Afghanistan. The contract contained a “pass through” provision requiring the additional pay be received by the pilots and crew members. The defendant received the hazard pay under its contract and, initially, passed that additional pay onto pilots and crews but stopped in the first year of the contract. The district court certified a class of pilots and crew members and the parties commenced discovery.

The defendant responded to discovery requests regarding “hazard pay” by saying it had no such documents or communications. In response to an initial motion to compel the defendant told the court it could not produce any such documents because “there is no hazard pay.” The class, though, produced invoices of the defendant to third parties, obtained through subpoenas, with line entries reflecting “hazardous duty bonus”, “hazardous duty flight deck bonus” and similar entries. The defendant ultimately produced some documents to the class, but they were heavily redacted and were produced without a privilege log.

The class filed a second motion to compel when the defendant still had not produced responsive documents and the district court entered a show cause order requiring the defendant to show why the court should not strike the defendant’s answer as a sanction. At the hearing on the show cause order the defendant’s counsel represented everything had been produced. Subsequently, the defendant produced additional responsive documents and the district court ordered the defendant’s answer stricken.

In affirming the district court’s order, the Ninth Circuit noted the district court had warned the defendant of possible case-dispositive sanctions for further discovery violations, and had considered the defendant’s willful disobedience, the pointlessness of lesser sanctions, and the district court’s anticipation of continued deceptive conduct by the defendant. The sanction, already effectively in excess of $5 million, could get worse. The Ninth Circuit reversed the district court’s order preventing the jury from considering punitive damages and remanded the case for a jury trial on the class’ punitive damages claim. And the defendant’s counsel was not spared the Ninth Circuit’s ire – the opinion recommends “that the district court, in the exercise of its discretion, report [defendant’s counsel] to the state bar to determine whether disbarment or some other sanction is merited.”

Exposure is exponentially greater in class litigation to begin with. Playing games in discovery is risky (and improper) in any case but in class litigation it is a fool’s choice.

Ninth Circuit Affirms Default Judgment as Discovery Sanction in Certified Class Action