Opinion
MDL No. 2775 Master Docket No. 1:17-md-2775
12-23-2020
IN RE: SMITH & NEPHEW BIRMINGHAM HIP RESURFACING (BHR) HIP IMPLANT PRODUCTS LIABILITY LITIGATION
THIS DOCUMENT RELATES TO ALL BHR AND THA TRACK CASES
MEMORANDUM
Now pending is Plaintiffs' motion to compel and for sanctions (ECF 2255). These motions concern the apparent disconnect between, on the one hand, the representations of Smith & Nephew's counsel that Dr. Peter Heeckt, the company's former Chief Medical Officer, left on amicable terms and was not fired from his position and, on the other hand, an email later produced in discovery in which Heeckt characterizes his departure from the company as a "functional[] terminat[ion]." (See ECF 2255-2, Ex. A). The court, in its September 25, 2020, order, has already addressed the issues presented by the motion to compel. (See ECF 2305). This memorandum addresses the remaining issues raised by the motion for sanctions. For the reasons stated herein, the court will deny the motion for sanctions.
FACTS
Dr. Peter Heeckt, the one-time Chief Medical Officer at Smith & Nephew, was long viewed by Plaintiffs as a key witness in this MDL. As early as November of 2010, Heeckt had sought to publish failure data regarding Smith & Nephew's BHR hip-implant devices. (See ECF 2255-8, Email from Heeckt to Shelton). Indeed, by May of 2011, Heeckt was apparently still "adamant" that BHR revision data needed to be provided to the Food and Drug Administration and added to Smith & Nephew's labeling. (See ECF 2255-9, Email from Rouss to Telling). But by April of 2012, Heeckt was no longer working for the company. (ECF 2282-2, Heeckt Decl.).
Unsurprisingly, then, Plaintiffs have long sought discovery from and to depose Heeckt. (ECF 2255-1 at 3). On March 11, 2020, Plaintiffs served a request for production on Smith & Nephew seeking documents related to Heeckt's personnel file, severance package, and any emails, memos, or other documents related to Heeckt's departure from the company. (ECF 2255-3). Smith & Nephew objected to this request, stating that it had already produced documents by, to, or from Heeckt. (ECF 2255-4). Following multiple meet and confers, Ms. Kim Moore, counsel for Smith & Nephew, emailed Plaintiffs' counsel and stated that Heeckt's departure from the company was "amicable" but that Smith & Nephew would nevertheless produce correspondence related to his departure. (ECF 2255-6). The subsequent production included an email containing an official announcement of Heeckt's departure. (ECF 2255-5).
Plaintiffs believed this production was improperly circumscribed, and they filed a motion to compel. (ECF 2207). On July 22, 2020, the court held oral argument on the motion to compel, at which time Mr. Daniel Spira, another of Smith & Nephew's attorneys, reiterated that Heeckt's departure from the company was "amicable," that he was "not fired," and that there was "simply nothing to [the] story" that Heeckt was fired or asked to leave the company. (ECF 2236, Hearing Tr., at 45-46). The court thereafter ordered production of any other documents not already produced that were relevant to the reasons for Heeckt's departure. (ECF 2238). In compliance with that order, on August 6, 2020, Smith & Nephew produced to Plaintiffs 186 new documents, including a December 16, 2011, email from Heeckt suggesting he was "functionally terminated" and citing in support of that belief the fact that his budgetary and personnel responsibilities had been significantly diminished in the company's reorganization. (ECF 2255-2).
Six days later, Plaintiffs filed this motion seeking, among other things, sanctions. (ECF 2255). Since that time, Smith & Nephew has filed a declaration from Heeckt clarifying that his email employed the language of functional termination in an attempt to secure severance pay, and a declaration from Ms. Sarah Segrest-Jay indicating that Smith & Nephew did not discover this "functionally terminated" email until the court required Smith & Nephew, in its July order, to perform a broader search than it had previously executed. (ECF 2282-2, Heeckt Decl., ¶ 4; ECF 2282-4, Segrest-Jay Decl., ¶ 9). Finally, on December 1, 2020, Heeckt sat for a deposition via remote videoconference, and testified that he was neither fired from nor asked to leave Smith & Nephew, that his departure from Smith & Nephew had nothing to do with BHR labeling, and that he used the term "functionally terminated" in an attempt to qualify for a particular severance package. (See ECF 2402, Redacted Heeckt Dep. Tr., and ECF 2403, Unredacted Heeckt Dep. Tr., at 205:18-206:5, 228:14-229:12, 230:6-231:12, 234:13-20).
ANALYSIS
Under the Federal Rules of Civil Procedure, parties "may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case[.]" Fed. R. Civ. P. 26(b)(1). When parties do not comply with the discovery rules, numerous mechanisms permit a district court to issue sanctions. First, Rule 37 affords a district court discretion to impose sanctions for a party's failure to comply with its discovery orders. Under Rule 37(a)(4), "an evasive or incomplete disclosure, answer, or response must be treated as a failure to disclose, answer, or respond." If a party fails to obey a discovery order, the court may issue "further just orders." See Fed. R. Civ. P. 37(b)(2)(A) (enumerating a non- exhaustive list of possible sanctions). And sanctions may be available for a failure to disclose information or to supplement earlier disclosures. See Fed. R. Civ. P. 37(c)(1). Next, sanctions are also available under Rule 26(g), though only where an attorney signs a discovery request, response, or objection in violation of the standards set forth in the rule. See Fed. R. Civ. P. 26(g)(3). Finally, the district courts have inherent power to sanction discovery-related misconduct, though such power is to be exercised only rarely and upon evidence of fraudulent misconduct or bad faith. Poole ex rel. Elliott v. Textron, Inc., 192 F.R.D. 494, 497-98 (D. Md. 2000); cf. Hodge v. Wal-Mart Stores, Inc., 360 F.3d 446, 449 (4th Cir. 2004) (noting that imposition of a sanction to redress abuses of the judicial process is an inherent power of federal courts). In the context of an MDL, the authority to impose sanctions for discovery-related misconduct has particular significance, as the MDL judge bears the "enormous" task of "mov[ing] thousands of cases toward resolution on the merits while at the same time respecting their individuality," and to carry out this task in a smooth and efficient manner, the judge must establish and enforce the rules for discovery. In re Phenlypropanolamine Prods. Liab. Litig., 460 F.3d 1217, 1231 (9th Cir. 2006); see also Freeman v. Wyeth, 764 F.3d 806, 810 (8th Cir. 2014) ("The MDL judge must be given greater discretion to create and enforce deadlines in order to administrate the litigation effectively.").
In this matter, Plaintiffs argue that sanctions are appropriate under both Rule 26 and Rule 37 given that Smith & Nephew's attorneys purportedly misrepresented the nature of Heeckt's departure, and that as a result of the delay in producing the "functionally terminated" email, Plaintiffs were unable to thoroughly examine witnesses already deposed. (See ECF 2255-1 at 14-15). Specifically, Plaintiffs take issue with several of Smith & Nephew's representations concerning Heeckt: (1) there was "simply nothing to [the] story" that Heeckt was "fired or asked to leave for raising questions about BHR labeling"; (2) "Heeckt was not fired [and his] separation from the company was amicable"; (3) "none of [the] materials [produced as of July 22, 2020] calls into question [Smith & Nephew's] representation to [Plaintiffs'] counsel" and "[n]othing suggests [Heeckt] was fired from the company or asked to leave." (Id.). Plaintiffs argue that there is "no way that any attorney could read an email that an employee was 'functionally terminated' after being removed from his responsibilities over the product at issue in the litigation and then represent that the employee was not fired at all and that there was 'simply nothing to' Plaintiffs' theories." (Id. at 15). Thus, Plaintiffs assert that Smith & Nephew either failed to honor the duty of candor owed to this court or—if they only discovered their representations were false after oral argument—failed to correct the false statements. (Id.).
Smith & Nephew counters that sanctions are legally impermissible as well as unjustifiable on the basis of the factual record and in light of Heeckt's declaration, (see ECF 2282 at 9, 11), which has been supplemented by and is consistent with Heeckt's deposition testimony, (see ECF 2402; ECF 2403). First, Smith & Nephew argues that neither Rule 26(g) nor Rule 37(c)(1) is applicable here, and thus neither can be the basis for sanctions. (Id. at 9). Second, Smith & Nephew argues that Heeckt's email is consistent with their representations and that Plaintiffs have taken Heeckt's email out of context as the email reflects "nothing more" than Heeckt arguing that he was "eligible for contractual severance pay, an issue [he] earlier raised when he decided to leave due to reorganization." (Id. at 10-11). Finally, even if the email was relevant, Smith & Nephew's attorneys contend that they did not know about the email until just before it was produced to Plaintiffs on August, 6, 2020, in response to the court's July 27, 2020, order. (Id. at 12).
The court will address the parties' arguments in light of each potential basis for imposing sanctions for the alleged misconduct.
I. Rule 26(g)
The court agrees with Smith & Nephew that sanctions are not warranted under Rule 26(g). The standards set forth in that rule require an attorney to certify that a discovery request, response, or objection is, "to the best of the [attorney's] knowledge, information, and belief formed after a reasonable inquiry," consistent with the Federal Rules and "warranted by existing law" and "not interposed for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation." Fed. R. Civ. P. 26(g)(1)(B)(i)-(ii). As the Advisory Committee notes to the 1983 amendments to this rule make clear, "[t]he duty to make a 'reasonable inquiry' is satisfied if the investigation undertaken by the attorney and the conclusions drawn therefrom are reasonable under the circumstances." Ultimately, "[i]f a certification violates this rule without substantial justification, the court . . . must impose an appropriate sanction on the signer." Fed. R. Civ. P. 26(g)(3).
The court has before it no evidence that Smith & Nephew's attorneys did not, to the best of their knowledge after a reasonable inquiry, believe their responses and objections were consistent with the Federal Rules and warranted by existing law. According to the sworn declaration of Ms. Segrest-Jay, when Plaintiffs made their March 11 request for production, Smith & Nephew searched for documents relating to Heeckt's departure by searching emails sent within a few months of his departure, in early 2012. (ECF 2282-4, Segrest-Jay Decl., ¶ 6). As a result, the "functionally terminated" email, which was sent in December of 2011, would not have been reviewed by Smith & Nephew until—pursuant to this court's July 22 order—it broadened its search. (Id. ¶ 9). Therefore, the court finds there is no reason to conclude that Smith & Nephew deliberately or knowingly withheld the "functionally terminated" email; rather, it appears that the email was produced to Plaintiffs in short order after it was discovered. Nor is there any indication that Smith & Nephew's responses and objections were made for anything but a proper purpose within the context of the adversarial process. Indeed, Smith & Nephew's April 10 objection was made on the grounds that the request was overly broad, unduly burdensome, and not proportional to the needs of the case, among other reasons—all of which are objections grounded in existing law. (ECF 2255-4). Accordingly, there is no basis for sanctions under Rule 26(g).
II. Rule 37(c)
Nor are there grounds for sanctions under Rule 37(c) for a failure to supplement an earlier discovery response. Rule 37(c) states that when "a party fails to provide information . . . as required by Rule 26(a) or (e)," the court "may impose other appropriate sanctions, including any of the orders listed in Rule 37(b)(2)(A)(i)-(iv)." Rule 26(e) imposes a duty on a party who has responded to a request for production to "supplement or correct its . . . response in a timely manner if the party learns that in some material respect the . . . response is incomplete or incorrect."
The court appreciates that, at least at first glance, it is somewhat difficult to understand why the December 16, 2011, "functionally terminated" email wasn't produced as a result of Plaintiffs' March 11, 2020, request for "any and all emails ... related to Peter Heeckt leaving Smith & Nephew." The email was sent by Heeckt, the word "terminated" appears in the body of the email, and it is clearly related to the discussions about Heeckt's departure. As explained above, however, Smith & Nephew represents that it "focused on the early- to mid-2012 time period" in searching for correspondence related to Heeckt's departure because his "departure date was in April 2012." (ECF 2282-4, ¶ 6). Accordingly, Smith & Nephew states that the "first time that any lawyer representing Smith & Nephew viewed [the email] was August 2, 2020, after it was identified by [its vendor] United Lex for production." (Id. ¶ 9).
In light of Ms. Segrest-Jay's sworn declaration, which indicates that Smith & Nephew did not discover the "functionally terminated" email until just before it was produced, the court cannot conclude that Smith & Nephew's attorneys made any false representations to Plaintiffs' counsel or to this court, or that they had knowledge sufficient to require them to supplement their earlier production under Rules 26(e) and 37(c) until August 2, 2020. Because Plaintiffs produced the "functionally terminated" email just four days after August 2, 2020, there is no basis for sanctions under Rule 37.
III. Inherent Powers
Finally, this is not the rare case that calls for a federal court to exercise its inherent power to impose sanctions. The federal courts do have "inherent powers" to "manage their own affairs so as to achieve the orderly and expeditious disposition of cases." Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178, 1186 (2017) (quoting Link v. Wabash R. Co., 370 U.S. 626, 630-31 (1962)). The Fourth Circuit Court of Appeals has stated that these inherent powers allow the courts "to impose order, respect, decorum, silence, and compliance with lawful mandates." United States v. Shaffer Equipment, Co., 11 F.3d 450, 461 (4th Cir. 1993). But "because this power is not regulated by Congress or the people and is particularly subject to abuse, it must be exercised with the greatest restraint and caution, and then only to the extent necessary." Id. And where the Federal Rules of Civil Procedure already provide for adequate sanctions, courts should rely on the Rules before exercising their inherent powers. See Beach Mart, Inc. v. L & L Wings, Inc., 302 F.R.D. 396, 405-06 (E.D.N.C. 2014) ("The inherent power [of the district courts] . . . remains to 'fill in the interstices' not covered by the Rules.").
Finding no violation of Rules 26 and 37 that would warrant sanctions, the court must exercise restraint and caution in turning to its inherent powers to order what it could not otherwise order under the Federal Rules. In this case, there is no evidence that Ms. Moore, Mr. Spira, or any other attorney representing Smith & Nephew engaged in discovery-related misconduct. Nor is there any evidence that Smith & Nephew's attorneys made any misrepresentations to opposing counsel or to this court: Heeckt testified under oath at his recent deposition that he used the term "functionally terminated" in an attempt to qualify for an executive severance package and that it was "[a]bsolutely" true that he was not fired or asked to leave Smith & Nephew. (ECF 2402, Redacted Heeckt Dep. Tr., and ECF 2403, Unredacted Heeckt Dep. Tr., at 227:8-229:12, 230:6-231:12, 234:13-20). Nor, importantly, is there any evidence that Heeckt's departure was a result of the positions he took with respect to BHR labeling. (See id. at 205:18-206:5, 234:13-20). Accordingly, the court will not exercise its inherent powers to issue any sanctions.
For this reason, the court also finds that that there is no basis to conclude that Smith & Nephew's attorneys violated Rule 19-303.3(a) of the Maryland Rules of Professional Conduct, which provides that an attorney's statements made in open court are proper only when the attorney knows the statement to be true or believes it to be true on the basis of a reasonably diligent inquiry.
CONCLUSION
This litigation commenced more than three years ago, and since that time the court has appreciated the collegiality and collaboration that has defined the relationship between the attorneys on both sides of this matter. As these cases move closer to trial, with much work remaining to be done and still in the midst of a pandemic, the court expects that counsel on both sides will endeavor to maintain a productive and professional relationship while zealously representing their respective clients.
For the reasons described above, the motion for sanctions will be denied. A separate order follows. 12/23/2020
Date
/s/_________
Catherine C. Blake
United States District Judge