Leave to appeal granted from an order entered in the United States District Court for the Southern District of New York, Goettel, Judge, denying a magistrate's recommendation precluding introduction of proof of damages.
Before Kaufman, Chief Judge, and Oakes and Meskill, Circuit Judges.
The Federal Rules of Civil Procedure carried the discovery principles of Equity into the nation's courts of law in the hope of expediting the litigation process and of transforming the sporting trial-by-surprise into a more reasoned search for truth.*fn1 On their face, the Rules deal harshly with the recusant deponent and the dilatory answeror. Courts have been reluctant, however, to impose the full range of sanctions available under Rule 37. Preclusion of testimony and dismissal are, to be sure, extreme sanctions, to be deployed only in rare situations. But unless Rule 37 is perceived as a credible deterrent rather than a "paper tiger," Rosenberg, New Philosophy of Sanctions, In Federal Discovery Rules Sourcebook 141 (W. Treadwell ed. 1972), the pretrial quagmire threatens to engulf the entire litigative process.*fn2
A panel of this court has accepted certification of an interlocutory appeal pursuant to 28 U.S.C. § 1292(b) which raises the following question: where a party, fully able to comply with a magistrate's order compelling discovery fails to do so due to a total dereliction of professional responsibility, amounting to gross negligence, may the district court in its discretion order a preclusion of evidence tantamount to the dismissal of a claim under Fed.R.Civ.P. 37? We conclude that it may.
Appellee Cine Forty-Second Street Theatre Corp. ("Cine"), has operated a movie theater in New York City's Times Square area since July 1974. It alleges that those owning neighboring theaters on West Forty-Second Street (the "exhibitors")*fn3 attempted through abuse of City agency processes to prevent the opening of its theater. When this tactic was unsuccessful, Cine contends, the exhibitors entered into a conspiracy with certain motion picture distributors*fn4 to cut off its access to first-run, quality films. Bringing suit on August 1, 1975, Cine claimed $3,000,000 in treble damages under the antitrust laws, and sought an injunction against the defendants' alleged anticompetitive practices.
On November 6, 1975, the eleven defendants served plaintiff with a set of consolidated interrogatories. Cine thereupon secured its adversaries' consent to defer discovery on the crucial issue of damages until it could retain an expert to review the rival exhibitors' box office receipts. Not until four months after the deadline upon which the parties had agreed, however, did Cine file its first set of answers to the remaining interrogatories. Moreover, even casual scrutiny reveals the patent inadequacy of these responses. Many were bare, ambiguous cross-references to general answers elsewhere in the responses. Highly specific questions concerning the design of Cine's theater were answered with architectural drawings that did not even purport to show the dimensions requested.
Although Cine now complains bitterly that these interrogatories amounted to pure harassment, it never moved to strike them as irrelevant or as harassing. Rather, it filed supplemental answers, which were similarly deficient, and then failed to obey two subsequent orders from Magistrate Gershon compelling discovery. At a hearing in October of 1977, the magistrate found Cine's disobedience to have been willful, and assessed $500 in costs against it. Soon afterwards, she further warned plaintiff that any further noncompliance would result in dismissal.
By the summer of 1977, as this conflict was coming to a head, Cine had still not retained the expert it claimed was necessary to respond to the damages interrogatories. Magistrate Gershobn quite reasonably and leniently ordered Cine merely to produce a plan to answer, but this yielded no result. The magistrate then directed Cine to answer the damages interrogatories, admonishing its counsel that future nonfeasance would be viewed in light of past derelictions. Cine did file two sets of answers, one over two months late and both seriously deficient.
The responses omitted, Inter alia, any information concerning significant time periods for which Cine claimed injury. Moreover, they failed to provide any indication as to the method of calculating a major portion of the alleged damages. Thereupon, at an unrecorded hearing held on September 7, 1978, Magistrate Gershon, once again held off the imposition of final sanctions in these already over-protracted discovery proceedings and ordered the defects cured, on pain of dismissal of the complaint. Cine stood mute, neither appealing from, objecting to, nor complying with the order. On September 20, the defendants moved before the magistrate for dismissal of the complaint, citing plaintiff's failure to obey the order requiring responses on damages.
At a formal hearing on October 19, 1978, Cine's attorney argued that several months earlier he and defense counsel had reached an "understanding," pursuant to which a deposition of Cine's principal officer, Clark, would replace the answers at issue. Cine has never introduced any written evidence or corroborative testimony demonstrating the existence of such an understanding. In any case, the magistrate's subsequent oral order compelling answers to the interrogatories would have superseded it.
Accordingly, Magistrate Gershon found that Cine had no basis for assuming that the answers were not due on the dates set in her orders. After noting plaintiff's history of disobedience in the face of her own repeated warnings, the magistrate concluded that Cine's present non-compliance was willful.*fn5 "(T)he plaintiff," she stated, "has decided when it will be cooperative and when it will not be cooperative, and that it does not have any right to do." She thereupon recommended to the district court that Cine be precluded from introducing evidence with respect to damages. This sanction was, of course, tantamount to a dismissal of Cine's damage claim, but left standing its claim for injunctive relief.
Judge Goettel, the district judge to whom Magistrate Gershon's order was submitted for approval, reacted to Cine's behavior as did Magistrate Gershon. He wrote, "if there were ever a case in which drastic sanctions were justified, this is it." But Judge Goettel could not fully accept the magistrate's finding of willfulness. "(T)he actions of plaintiff's counsel," he concluded,
were either wilful Or a total dereliction of professional responsibility. No other conclusion is possible. However, in the absence of a written direction, it is virtually impossible to establish that the attorney's ...