Duane Morris LLP: Motion For Sanctions Granted For Failure To Comply With Discovery Obligations To Designate Witness Under FRCP 30(B)6

Duane Morris recently obtained an order¹ from U.S. Magistrate Judge Jonathan Goodman in the U.S. District Court for the Southern District of Florida granting a motion for sanctions against QBE Insurance Corporation ("QBE") for failure to comply with a corporation's discovery obligations to designate a witness to bind the corporation and adequately prepare its witness to provide testimony under Federal Rule of Civil Procedure 30(b)(6). Sanctions were imposed against QBE in favor of Duane Morris client Jorda Enterprises, Inc. ("Jorda"), precluding QBE from offering any testimony at trial on the several subject matters for which its Rule 30(b)(6) designee was unable or unwilling to provide knowledgeable and specific responses. The court also awarded Jorda its attorneys' fees and costs for bringing the sanctions motion.

QBE filed a lawsuit against Jorda for equitable subrogation-seeking more than $3 million in damages-asserting that Jorda negligently installed a pipe in an HVAC unit at a luxury condominium building located in Miami, Fla., that was insured by QBE. Jorda contended, among other things, that it was not negligent; a number of other factors could have caused the pipe burst and leak (including Hurricane Katrina); and much of the physical and documentary evidence had been lost or destroyed through the fault of QBE. Jorda noticed a 30(b)(6) deposition of QBE on a number of topics related to these issues, and when QBE produced a witness that was unprepared to answer questions on those topics and subsequently failed to produce another representative who was adequately educated and prepared to testify on designated topics, Jorda filed a motion for sanctions.

Jorda argued that QBE had either ignored or refused to comply with the requirements of Rule 30(b)(6) and that it should be precluded from offering any testimony at trial on the subject matters for which its Rule 30(b)(6) designee was unable or unwilling to provide knowledgeable and specific responses. The court noted that there was little authority on the question of what consequences should flow from a plaintiff insurance company's failure to designate a witness to bind the corporation when:

1. it lacks knowledge of several topics listed in the corporate deposition notice because it is pursuing a subrogation claim assigned to it by its insured,
2. it has no material of its own to review for certain topics and has no employees or agents with the requisite knowledge and
3. it cannot prepare a designee on certain topics because the insured (who presumably has knowledge of the issues) refuses to cooperate with the insurer even though it received payments and is under a contractual obligation to cooperate.

The court also found that the insurance company failed to adequately prepare its own designee, who did not review all available materials. The court ruled that QBE "was obligated to seek out information and documents from available third party sources - including its insured, the condominium association. . . . Simply stated, the rule imposes a duty to provide testimony on matters known or 'reasonably available' to the corporation."

As part of the 44-page order, Judge Goodman agreed with Jorda and granted Jorda's motion for sanctions. Judge Goodman found that QBE did not provide testimony on any of the 35 topics related to electronically stored information ("ESI") as well as a number of other topics, including but not limited to:

1. persons who were responsible for observing or handling the HVAC pipe, the chain of custody surrounding the pipe and preservation of documents and other physical evidence;
2. how QBE apportioned responsibility for the damages;
3. Jorda's affirmative defenses of the negligence of others;
4. QBE's involvement in the insured's settlement of the underlying state court construction defects and negligence action;
5. how QBE arrived at the $3.02 million figure it paid to the insured;
6. any maintenance agreement obligating Jorda to maintain the air conditioning system at issue;
7. emergency procedures at the condominium building (and failures to follow them which may have increased the damage);
8. any other incidents involving the air conditioning system;
9. the operation of the cooling tower, pumping systems and electrical systems;
10. the loss of electrical power on or about the date of loss; and
11. and the change in construction from an apartment to a condominium and notice of the change to Jorda and other subcontractors.

Judge Goodman's order precludes QBE from offering any evidence on these topics at trial. The court found that it would be patently unfair to permit QBE to avoid providing a corporate deposition designee on certain topics (because its insured refuses to cooperate), yet allow it to take a position at trial on those very same issues by introducing testimony that Jorda was unable to learn about during a pre-trial deposition.

The court wrote what it called "a de facto Bible governing corporate depositions," detailing "the litigation commandments and fundamental passages about pre-trial discovery" to provide "guiding principles of 30(b)(6) depositions."

For Further Information

If you have any questions about this Alert, please contact Steven D. Ginsburg, Warren D. Zaffuto, any member of our Construction Group or the attorney in the firm with whom you are regularly in contact.

Note

1. QBE Ins. Corp. v. Jorda Enters., 2012 U.S. Dist. LEXIS 10752 (S.D. Fla. Jan. 30, 2012).

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