Saturday, June 18, 2016


SynEcology Partners, L3C v. Business RunTime, Inc., 2016 VT 29

By Elizabeth Kruska

The best word in this opinion is “animadversion,” which I looked up, and which the nice people at Merriam-Webster define as “a critical and usually censorious remark” or an “adverse criticism.” Pretty strong language, but that’s what happens sometimes when the court gets irritated. Irritated enough, in fact, to dismiss a case as a discovery sanction.

This was a little hard to follow. SynEcology was a software company founded by Grossman and Conde. They then sold the assets of the company to Kinney, who, I guess, continued to run the company as SynEcology. Grossman and Conde formed a new software company called Business RunTime.

In August of 2011, SynEcology sued RunTime, Conde, Grossman, and two former SynEcology employees for various claims, including fraud, theft of intellectual property, industrial sabotage, and several others. Discovery went on for two and a half years. Finally, RunTime filed a motion for contempt, sanctions, attorney fees. The trial court’s response was to dismiss SynEcology’s complaint. SynEcology appealed, and SCOV affirms.

Without making a tortured timeline, it went a little like this. The case got started, and the parties served their first sets of interrogatories. Business RunTime asked for SynEcology to produce all emails relevant to their claims. They reserved the right to receive them in their “native format” which means to receive them in the form they were created in, rather than put into some other form. They were due within a month.

A month comes and goes, and RunTime files a motion to compel, which the court granted about six weeks after that. Finally, SynEcology turns over some discovery, which they contended was everything. But, as it turned out, it wasn’t everything. The emails RunTime sought were not necessarily in order, and none were in the native format. SynEcology claimed that what wasn’t turned over was subject to various privileges. But, they said they’d turn over the documents sought if there was a protective order.

So, RunTime proposed a protective order, although it didn’t really think the information sought was subject to privilege. They specifically asked for the emails to be turned over in native format.

Five months later, SynEcology signed the protective order and subsequently said that it would respond to the rest of the request within a week.

Their definition of “week” is apparently different than others’ definitions, because four months later, SynEcology turned over a CD with emails, but it still wasn’t everything. This is now more than a year after the original request was made. They said that what wasn’t disclosed was privileged, but didn’t provide a privilege log. A party uses a privilege log to document the existence of a document and why the document is privileged, but not the contents of the document.

RunTime tried three more times over the course of the next several months to get the documents it sought initially with no success. Finally, they filed another motion to compel, which was granted. The court ordered SynEcology to produce the sought documents no later than July 1, 2014. The order said it had to be in native format, and that if something was claimed to be privileged, there needed to be a privilege log.

July 3, 2014 (so, two days after the deadline), SynEcology finally turned over some emails. But it still wasn’t everything, and there still was no privilege log. More requests were made. Initially SynEcology said there wasn’t anything else. Then they said they would send a privilege log. Then they said they’d send the information without claiming a privilege. Then they sent some of the emails they had previously claimed were privileged.

RunTime, apparently low on patience with the way this had gone, filed a motion for contempt and sanctions, seeking dismissal of the case in late July 2014. The case had been going on over two years, and they still hadn’t received the emails they sought in discovery that they had asked for and had been the subject of discovery litigation. SynEcology responded to the motion by saying they had turned over everything. Not long after, SynEcology’s attorney moved to withdraw from the case. That got scheduled for a hearing on September 29, 2014, along with the other pending motions.

That hearing time was mostly taken up by the motion to withdraw. But, RunTime continued to say that they were seeking dismissal of the case because of all the discovery problems. RunTime also added that because SynEcology had misrepresented facts about the discovery sought, that they didn’t trust SynEcology’s ability to comply with a discovery order.

The court let the attorney withdraw and gave SynEcology time to hire a new lawyer. A new lawyer came on board, and ended up filing a supplemental pleading to the court, indicating that the previously-taken position about the discovery was incorrect. SynEcology said it would keep looking for relevant emails, and would provide a privilege log.

You see where this is going. They turned over some emails. But it isn’t clear that it was everything, and there still was no privilege log.

February 26, 2015 rolls around and the trial court granted the motion for contempt and sanctions. It stated that SynEcology did not comply with the discovery process for two and a half years by not explaining numerous discrepancies in its responses, intentional misrepresentations, and failing to produce a privilege log. The trial court said, in appropriate legal terms, “I think we’re done here.”

SynEcology appeals. SCOV affirms.

The trial court controls discovery, and can sanction a party for failing to engage in the discovery process or failing to follow a discovery order. If the party acted in bad faith or willfully, and it caused prejudice to the moving party, the court can dismiss the case all together. This is totally within the court’s discretion. Dismissing a case is pretty drastic, so there’s got to be some seriously bad faith acting on the part of the party not abiding by the court order. If a party can’t comply with a discovery order for reasons not within their control, then it’s not one of these willful bad faith situations.

A party is prejudiced if they don’t have the information to be able to move forward in their case. Here, SCOV says that RunTime was prejudiced. They asked for certain information regarding SynEcology’s claims, and for nearly three years, it just wasn’t turned over. The trial court determined that SynEcology acted in bad faith by first not responding in a timely way, and then changed its tune about whether certain materials were privileged or not. Three times SynEcology was told to produce a privilege log, and it never did. The trial court found that all this added up to extensive delays, unnecessary motion practice, and attorney fees. All this prejudiced RunTime in its case.

SynEcology argues that the trial court should have explained how the discovery failures were serious enough to warrant a dismissal. SCOV cites a SCOTUS opinion that says due process is not violated if a court dismisses a case for failure to comply with discovery. SCOV says SynEcology’s discovery behavior was enough to warrant a dismissal and did not violate due process.

SynEcology also argues that they didn’t actually get to have a hearing on the contempt motion. SCOV says that’s not the case. There was a hearing on the contempt motion in September. Although much of that hearing was devoted to the motion to withdraw, the court did indicate that it would give SynEcology time to get set up with a new lawyer and to file a response before the court made a ruling. SCOV finds that the trial court gave ample time for the new lawyer to get caught up to speed. The new lawyer filed a supplemental pleading, but didn’t ask for a hearing on the contempt motion. Since nobody asked for a hearing, the court didn’t set one.

SCOV doesn’t address SynEcology’s argument that they weren’t warned that dismissal was going to happen. They point out that the motion asked for it in the first sentence of their motion. SCOV also points out that at the motion hearing there was discussion that dismissal was sought as a sanction. SCOV seems to find it hard to reconcile that they didn’t have notice, given these particular facts.

And here’s the use of the word “animadversion.” “SynEcology’s conduct regarding discovery, which the trial court’s order describes, was sufficient to justify the animadversion of the court.” The trial court had lost faith that SynEcology would participate in discovery in good faith, having not complied fully in over two years. In any case, SCOV affirms the trial court’s dismissal of SynEcology’s suit.

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