In Sardini Grp., Inc. v. Imperial Pac. Int’l (CNMI), LLC, No. 1:20-cv-00007 (D. N. Mar. I. Sept. 30, 2023), Northern Mariana Islands District Judge Ramona V. Manglona granted the defendant’s Motion for Sanctions and dismissed the case with prejudice due to plaintiff’s failure to comply with discovery orders, including requests for production of documents and communications, and failure to produce relevant documents and ESI.

Case Background

In this breach of contract case with claimed damages of nearly two million dollars, a bench trial commenced on August 2, 2022, nearly two years after the plaintiff initiated this civil action. During the bench trial, testimony revealed relevant documents that plaintiff did not produce including spreadsheets tracking work performed by its subcontractors, employment records such as time sheets, payment information to employees or subcontractors for work performed, and documents relating to subsidiaries and affiliates of plaintiff. Although defendant moved to dismiss the case based on these deficiencies, the Court denied the motion and instead ordered plaintiff to produce all additional responsive materials by August 12, 2022.

Plaintiff produced supplemental materials, but defendant argued plaintiff had “fallen far short of complying with the Court’s Order that it produce all responsive documents.” Multiple status conferences were held thereafter, each time following up on various financial records that the plaintiff was to produce, including internal financial records and bank account records. Each time, the Court pushed back the bench trial, and each time, Plaintiff apprised the Court that it encountered numerous roadblocks to gather discovery and that its efforts were ongoing.

These ongoing status conferences culminated in defendant’s oral motion for sanctions in the form of dismissal in December 2022. The Court ultimately set a briefing schedule ordering defendant to file a renewed motion to dismiss pursuant to Federal Rule of Civil Procedure 37 in writing, which was filed, opposed by plaintiff IPI, and replied to by defendant in support of its motion. The Court ultimately found in favor of IPI by sanctioning plaintiff and dismissing its case.

During the four-day bench trial, several of plaintiff’s witnesses testified remotely from locations within China. The Court sua sponte raised the issue of whether remote testimony of witnesses located from within China constituted a violation of Chinese law, and if so, what the appropriate remedy should be. At the time the Court dismissed plaintiff’s case, the Court noted that had defendant’s motion for sanctions been denied, the Court would have stricken the testimony from the China-based witnesses. Nevertheless, the Court also indicated that it would have permitted plaintiff to retake testimony outside of China.

Judge’s Ruling

Judge Manglona stated: “The Court finds that the discovery IPI seeks is not only relevant, but critical for Sardini to establish liability and for IPI to mount its defense thereto. However, due to Sardini’s delayed and incomplete discovery materials, Sardini cannot reasonably expect to meet its burden of proof or allow IPI to present a meaningful defense. IPI is therefore prejudiced without such relevant discovery. Furthermore, the Court’s generous extensions of discovery deadlines in the midst of trial and threats of other sanctions did not succeed in compelling Sardini to produce the relevant documents. Sardini’s failure to provide these documents at the outset of the discovery process despite multiple extensions and failures to even notify IPI of the existence of these documents is solely attributable to Sardini’s willful withholding.”

She also stated: “Here, the Court has repeatedly instructed Sardini to fully comply with its orders, engaged in months of status conferences, and has threatened monetary sanctions. While Sardini may not be faulted for the non-cooperation of other entities, Sardini can and is faulted for failing to preserve these records in the first place. It appears that Sardini did not engage a financial expert witness to sort all the financial documents, and it did not see the need to offer such testimony at trial because no financial expert witness was included in Sardini’s witness list. It does not appear that Sardini could recover from these discovery mishaps.”

Regarding the parties’ arguments on the applicability of Article 284 of the Chinese Civil Procedure law as to trial testimony taken from witnesses in China, Judge Manglona stated: “it is not that a party’s trial testimony would ‘unquestionably violate the law,’ it is that a party’s trial testimony would “unquestionably violate the law” if the party did not get authorization from Chinese authorities—as the Hague Convention prescribes… In summary, reading Article 284 and the Hague Convention in tandem, testimonial evidence from witnesses in China may be acquired if the proper procedures are followed, i.e., the procedures in the Hague Convention.”

Because of the plaintiff’s failure to comply with discovery orders, Judge Manglona stated: “Plaintiff Sardini has been given multiple opportunities to comply with the Court’s discovery orders issued in the midst of a bench trial. For its failure to comply and based on the foregoing reasons, the Court GRANTS Defendant IPI’s Motion for Sanctions pursuant to Fed. R. Civ. P. 37(b) and 37(e)…This case is hereby dismissed with prejudice.”

So, what do you think? Are you surprised that the case was dismissed with prejudice because of the plaintiff’s failure to comply with discovery orders, but there was no direct spoliation of evidence demonstrated? Please share any comments you might have or if you’d like to know more about a particular topic.

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