Associated Air Center LP v. Tary Network Ltd.
Dallas Court of Appeals, No. 05-13-00685-CV (March 4, 2015)
Justices Francis (Opinion), Evans, and Stoddart
Defendants refused to produce documents in response to Plaintiffs’ requests targeting the factual bases for their affirmative defenses, objecting instead. Later, Defendants also refused to allow their corporate representative to answer deposition questions about the factual bases for those affirmative defenses. An associate judge found Defendants to have engaged in “flagrant disregard of the[ir] discovery obligations” and, as a discovery sanction, struck their responses to pending no-evidence summary judgment motions aimed at their affirmative defenses and granted those motions. The sanctions order summarily recited that the associate judge had considered and rejected lesser sanctions because of the Defendants’ “egregious conduct.” The district judge affirmed. After a two-week jury trial, at which Defendants were barred from presenting evidence pertaining to their affirmative defenses, the district court rendered a nearly $40 million judgment for Plaintiffs. The Dallas Court of Appeals, however, reversed and remanded.
The Court first held that, even though the trial court had not struck Defendants’ pleadings, its rulings constituted a “death penalty” sanction nonetheless. “Any sanction that adjudicates a claim and precludes the presentation of the merits of the case,” the Court explained, “constitutes a ‘death penalty’ sanction.” Next, the Court rejected the mere summary recitation by the associate judge, affirmed by the district court, that lesser sanctions had been considered. “The law,” it said, “requires more.” When “death penalty” sanctions are imposed, the trial court must provide a “reasoned explanation” of its consideration of lesser sanctions and why they would not suffice. In this instance, the Court of Appeals found lesser sanctions—such as requiring Defendants to produce documents and to present their corporate representative for further deposition testimony—would have sufficed. Finally, the Court rejected Plaintiffs’ argument that Defendants’ conduct was so “egregious” as to warrant “death penalty” sanctions. “Case determinative sanctions may be imposed in the first instance only in exceptional cases when they are clearly justified and it is fully apparent that no lesser sanctions would promote compliance with the rules.” This, the Court held, was not such an “exceptional case.” And so, because “the sanction ordered by the trial court affected and shaped the presentation and development of this case during trial for both sides,” the Court of Appeals reversed and remanded for a new trial.