The ‘doomsday sanction’: Defendants’ answer struck for discovery violations

The dreaded terminating sanction, also known as the doomsday sanction, is the nuclear option of civil benchslaps.

And Davidson County Superior Court Judge Jeff Carpenter pushed the button.

Apparently fed up with alleged electronic discovery-related chicanery, Carpenter granted a doomsday sanctions motion from two doctors who are suing the Wake Forest Baptist Medical Center-owned Cornerstone Health Care, their former employer.

In granting the doctors’ motion, Carpenter struck Cornerstone’s answer to the complaint, essentially booting the medical group out of court for not playing by the rules. He found that Cornerstone shrugged off two prior sanctions orders — from a different judge — for discovery violations and then failed to supplement the doctors’ specific discovery requests.

Carpenter wrote in his March 21 sanctions order, which Lawyers Weekly received in an email from a “Mr. Justice,” that Cornerstone had “routinely failed to meet its duties under the North Carolina Rules of Civil Procedure in its approach to responding to discovery requests of the plaintiffs.”

“No lesser sanctions than the sanctions imposed … would be effective in correcting the defendant’s continued failure to meet its duties … to seasonably supplement its responses,” Carpenter added.

Cornerstone’s attorney, Rodney Guthrie of Bennett Guthrie Latham in Winston-Salem, wrote in an email that he and his client “consider the court’s ruling unfortunate and we strongly disagree with it.” Cornerstone has appealed the order and Guthrie declined to make any more public comments about the case before it’s resolved.

The doctors’ attorney, G. Gray Wilson of Nelson Mullins Riley & Scarborough in Winston-Salem, turned down an interview request.

But he wrote in the doctors’ motion for terminating sanctions that Cornerstone had “purposefully impeded plaintiffs’ efforts to obtain discoverable information needed to prosecute its case for two and a half years.”

The plaintiff doctors, James Dasher and Thomas Walsh, have accused Cornerstone of financial mismanagement and retaliating against them, “financially and otherwise,” for “questioning the direction” that Cornerstone was headed in before they left and joined another practice.

The suit is essentially a breach of contract action with Dasher and Walsh asserting that they’re owed millions in unpaid compensation, according to Cornerstone’s response to the doctors’ motion.

“There could be no worse miscarriage of justice than striking defendant’s answer in this case,” Guthrie wrote in the response. He’d asked the court to not only deny the motion but also order Dasher and Walsh to pay Cornerstone’s attorneys’ fees for having to fight the motion. Instead, Cornerstone now has to pay the doctors’ attorneys’ fees as part of the latest sanctions.

Describing the motion for terminating sanctions as “truly extraordinary,” Guthrie wrote that he “could find no case in the federal circuits where a [discovery] violation has ever been the basis of a motion to strike a party’s pleading.”

“Counsel for the plaintiffs certainly did not submit any such authority to the court,” he added.

Dasher and Walsh sought sanctions against Cornerstone under Rule 26 of the civil procedure rules, but state trial judges in other cases, including Badillo v. Cunningham, have handed down terminating sanctions under Rule 37 for failure to comply with prior discovery orders. The state Court of Appeals affirmed the Badillo ruling in 2006.  

But in this case, Wilson argued that Rule 26 applied because his clients were asking the court to sanction Cornerstone for its “failure to produce a broad array of documents not addressed by the prior order along with its false verifications and lack of supplementation.”

Cornerstone was first sanctioned in July 2016, when Superior Court Judge Mark Klass ordered that a third party e-discovery vendor, DiscoverReady, be brought in to collect and catalog “electronically stored communications” of the medical group’s six current and former corporate officers.

Klass sanctioned Cornerstone again in April 2017 and ordered it to pay $5,817 in attorneys’ fees for refusing to let DiscoverReady gather text messages from the cellphones of those same six officers.   

In asking the court to strike Cornerstone’s answer as a sanction, Wilson argued that Cornerstone had “improperly withheld a substantial number of highly relevant and damaging documents within its custody and control since May 2015.”

If that were true, Cornerstone’s former CEO, Grace Terrell, committed perjury twice by “signing discovery verifications that made false representations pertaining to the existence of relevant material requested in discovery,” Wilson wrote in the sanctions motion.  

That material later surfaced when DiscoverReady copied Cornerstone’s servers, Wilson told the court. He wrote that the “contents of just a few of these improperly withheld electronic communications are staggering and profound.”

Unfortunately, an excerpt from the correspondence in question was redacted from the motion for sanctions, which asserted that Cornerstone’s alleged cat-and-mouse game with discovery has “needlessly increased the cost of litigation in the six figure range.”

Follow Phillip Bantz on Twitter @NCLWBantz