In the case In re HomeAdvisor, Inc. Litig., No. 16-cv-01849-PAB-KLM (D. Colo. Jan. 16, 2023), Special Master Maura R. Grossman granted in part and denied in part defendants’ motion for sanctions against plaintiffs for violating a protective order in the case, finding plaintiffs’ counsel responsible for over $50,000 in Master’s fees, as well as paying a “reasonable proportion” of defendants’ attorneys’ fees and costs litigating various disputes (to be determined and awarded after a fee submission by defendants).

Case Discussion

In this class action initiated on behalf of Home Service Professionals (“HSPs”) who purchased HomeAdvisor memberships and alleged they were deceived by fraudulent misrepresentations or omissions concerning HomeAdvisor membership conditions and service requests, the Court issued an Order Appointing Master for Discovery back in April 2018. Special Master Grossman stated: “It would be an understatement to say that discovery was contentious and protracted in this matter; merits-related discovery—with its many accompanying disputes—began in May 2017 and continued unabated until fact discovery finally closed on June 30, 2021”, also noting that the present dispute – a motion for sanctions brought by HomeAdvisor, Inc., IAC/InterActiveCorp, Angi Homeservices, Inc., and CraftJack Inc. (the “HA Defendants”) “has a long and tortured history”.

What led to the motion for sanctions was the granting of the HA Defendants’ Motion to Compel certain additional discovery concerning plaintiffs’ contacts with the Federal Trade Commission (“FTC”) – contacts which the HA Defendants alleged were improper and in violation of the Protective Order (the “PO”) entered in this matter. HA Defendants alleged that Plaintiffs produced—belatedly and only under Court order—nearly 100 documents responsive to Defendants’ RFPs about Plaintiffs’ communications with the FTC “to assist the FTC in its efforts to prosecute [HomeAdvisor],” which was “an impermissible second use” of HomeAdvisor’s highly confidential discovery material in violation of the PO. Defendants contended that the documents revealed that those written communications began at least as early as February 10, 2020—shortly after Plaintiffs learned of the FTC’s investigation through discovery designated ‘Highly Confidential’ under the Protective Order and continued until at least April 9, 2021, the day after Defendants raised this issue with the Master.

Additionally, the FTC produced several voicemails from Plaintiffs’ counsel to the FTC staff from February 2020 through mid-November 2021, which indicated continued communications with the FTC for more than six months after the issue was raised with the Master.

The Opening Brief in the HA Defendants’ Motion for Sanctions was filed on January 24, 2022. Additional briefings were filed by both parties in support of their respective positions nine times over a nearly one-year period. Plaintiffs also submitted in camera declarations twice and the parties participated in a videoconference with the Master on July 15, 2022 to discuss the dispute. The positions of the parties from each of those briefings are discussed at length in the ruling.

Special Master’s Ruling

In considering all the evidence, Special Master Grossman stated: “Plaintiffs nowhere explain their sudden shift from written (i.e., email) communications with the FTC to exclusively telephone contacts once the HA Defendants sought to obtain their unproduced communications and the documents shared with the FTC beginning in April 2021… Clearly, Plaintiffs did not anticipate that the FTC would retain copies of the voicemail messages Plaintiffs’ counsel left for the FTC and would later produce them to the HA Defendants, which left them dead to rights.” She also stated: “Plaintiffs’ arguments in connection with this dispute have been a moving target and, at times, their litigation strategy has been unnecessarily caustic and belligerent. They have shown no remorse and have made no apology for their discovery failures, their repeated violation of the PO, and/or for misleading both the HA Defendants and the Master, who was literally gob smacked by the extent of Plaintiffs’ involvement with the FTC, which was first disclosed in their May 13, 2021 In Camera Declaration”.

Nonetheless, Special Master Grossman denied HA Defendants’ requests for relief regarding: conducting further discovery into Plaintiffs’ communications with the FTC, to hold Plaintiffs in contempt, to order that Plaintiffs “pay a $100,000 sanction to the Clerk of Court,” and to bar Plaintiffs “from citing or otherwise relying on any FTC-related discovery [the HA Defendants] produced in this action…including all productions and submissions Defendants made to the FTC and any documents Defendants received from the FTC”.

However, Special Master Grossman granted defendants’ request for the relief of attorney’s fees and costs, stating: “Plaintiffs’ counsel’s responses to discovery were calculated to and did obfuscate and mislead, and their repeated misstatements did not meet the standard of candor, cooperation, and professionalism expected of experienced and talented counsel of this caliber. Their conduct proved to be profoundly disappointing to the Master.” And she also granted defendants’ request for plaintiffs “to pay all of the Master’s fees associated with drafting the [MOO], and any related fees she incurred in connection with her analysis and evaluation of Plaintiffs’ significant misconduct”, stating:

“By continuing to double down on their misstatements and to aggressively press arguments that lacked merit, Plaintiffs’ counsel imposed undue burden and cost on the HA Defendants by forcing the Master to spend massive amounts of time investigating and formally resolving matters that could easily have been avoided. As a matter of fundamental fairness, the HA Defendants, who have prevailed on virtually all, if not all, of the motions related to this dispute, should not have to bear the cost of the Master’s fees. Accordingly, the Master will order Plaintiffs’ counsel only—not Plaintiffs—to reimburse the HA Defendants for the portion of her fees related to this dispute that the HA Defendants have paid (and will pay) to the Master since the Master first advised the parties orally of her ruling on the Parties’ Joint Motion for Clarification of the Meaning of Paragraph 6 of the Protective Order [Dkt. 63] and a Determination of Whether or Not Plaintiffs Have Violated That Provision, and the HomeAdvisor Defendants’ Motion to Compel Supplementation of Their Requests for Production Nos. 11, 12, 30, 31, and 32, on May 21, 2021, and warned Plaintiffs’ counsel that they were at risk of bearing the cost of further proceedings on these matters.”

As a result, Special Master Grossman ordered that “Plaintiffs shall remit payment of $50, 392.50 to the HA Defendants” and ordered the HA Defendants to “make a petition to the Master for fees and costs that they believe are reasonable in amount and fairly attributed to Plaintiffs’ Counsel’s sanctionable conduct as set forth above.”

So, what do you think? Should plaintiffs’ counsel have received more significant sanctions? Should plaintiffs have shared in the sanctions? Please share any comments you might have or if you’d like to know more about a particular topic.

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