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In re Regions Morgan Keegan Securities, Derivative & Erisa Litigation

United States District Court, W.D. Tennessee, Western Division

August 17, 2017

MK HOLDING, INC. d/b/a/ REGIONS MORGAN KEEGAN TRUST COMPANY and REGIONS FINANCIAL CORPORATION, Defendants. CEIL WALKER NORRIS, in her role as co-trustee and beneficiary of the Walker Marital Trust #2, the Vernon Walker Trust for Cecilia Walker and The Vernon Walker Trust for Deloss Walker, as principal and beneficiary of the Ceil Walker Rollover IRA, WALKER & ASSOCIATES, INC., and CEIL T. WALKER REVOCABLE TRUST, Plaintiffs,



         Before the Court is the Magistrate Judge's Report and Recommendation, dated April 28, 2017 (the “Report”). (ECF No. 118.) The Court referred three motions, filed by Defendants MK Holding, Inc. and Regions Financial Corporation, to the Magistrate Judge for a determination: (1) Defendants' Rule 37(d) Motion for Sanctions Due to Plaintiffs' Failure to Respond to Discovery (the “Discovery Sanctions Motion”) (ECF No. 70); (2) Defendants' Motion to Exclude Expert Report and Testimony of P. Richard Evans (the “Exclusion Motion”) (ECF No. 72); and (3) Defendants' Rule 37(c) Motion for Sanctions Due to Plaintiffs' Failure to Comply with Rule 26(a)(3) and this Court's Order (the “Pretrial-Disclosure Sanctions Motion”) (ECF No. 108). The Report recommends, as a sanction, that this action be dismissed for “Plaintiffs' counsel's repeated failure to participate in the discovery process and failure to obey orders of the Court.” (ECF No. 118 at 1.) On May 12, 2017, Plaintiffs Ceil Walker Norris, Walker & Associates, Inc., and the Ceil T. Walker Revocable Trust filed an “Appeal of the Magistrate Judge's Report and Recommendation” (the “Objections”). (ECF No. 121.) Defendants responded on May 26, 2017. (ECF No. 122.) Without seeking leave of Court, Plaintiffs filed a reply in support of their Objections on June 2, 2017.[1] (ECF No. 123.)

         For the following reasons, the Report is ADOPTED, Defendants' Discovery Sanctions Motion, Exclusion Motion, and Pretrial-Disclosure Sanctions Motion are GRANTED, and this case is DISMISSED.

         I. BACKGROUND

         The Magistrate Judge found the following facts relevant to Defendants' Discovery Sanctions Motion, to which Plaintiffs do not object:

Plaintiffs filed this action against Defendants on December 1, 2008 generally alleging that MK Holding breached its duties as Trustee of the Plaintiff Trusts by investing Plaintiffs' assets in certain Bond Funds. This case was consolidated in MDL proceedings on July 10, 2009.
On February 5, 2016, Defendants served Plaintiffs with their First Interrogatories, Request for Production of Documents and Request for Admissions. Plaintiffs failed to timely respond by the deadline of March 4, 2016. On March 11, 2016, Defendants sent Plaintiffs' counsel a letter notifying Plaintiffs that the Requests for Admission were deemed admitted due to Plaintiffs' failure to respond, and asked that Plaintiffs respond to the Request for Production and Interrogatories by March 28, 2016. Plaintiffs did not respond to Defendants' letter, nor did Plaintiffs respond to the follow up letter on March 31, 2016. A status conference was held April 4, 2016 wherein the Court directed the parties to provide additional discovery to one another by April 18, 2016, however Plaintiffs again failed to respond.
On April 25, 2016, Defendants sent Plaintiffs a third letter attempting to elicit the past-due discovery responses. In response, on May 5, 2016, Plaintiffs provided responses to Defendants' Interrogatories and some responsive documents. On May 23, 2016, Defendants sent Plaintiffs a letter identifying the deficiencies in Plaintiffs' production and asking that Plaintiffs correct the deficiencies by May 27, 2016. Plaintiffs did not respond.
On May 31, 2016, Defendants engaged Plaintiffs in a telephone call in an attempt to resolve the discovery issues. Plaintiffs agreed to produce written responses to Defendants' Requests for Production and to produce additional responsive documents. Plaintiffs finally provided additional discovery on June 8, 2016 which was insufficient.

(ECF No. 118 at 2.)

         Thereafter, Defendants engaged Plaintiffs through a series of emails and telephone calls in an attempt to obtain the withheld discovery. Defendants emailed Plaintiffs on June 9, 2016, prompting a telephone call in which Plaintiffs agreed to produce additional documents or responses and, as to certain document production requests, confirm in writing that, after conducting a good faith search, they had no additional documents. (ECF Nos. 65-8, 65-9.) Plaintiffs failed to perform. (ECF No. 65-10.) On June 15, 2016, Plaintiffs again agreed, during a telephone call with Defendants, to produce the documents and responses promised. (Id.) On June 22, 2016, Defendants emailed Plaintiffs and asked them to bring copies of all responsive documents Plaintiffs had agreed to produce to a deposition scheduled the following day. (ECF No. 65-11.) Plaintiffs again failed to produce the requested documents and information. (ECF No. 65-12.) On June 25, 2016, Defendants emailed Plaintiffs informing them that, if the requested items were not produced by June 27, 2016, Defendants would file a motion to compel. (Id.)

         As the Report discusses, on June 28, 2016, after Plaintiffs had failed to produce the requested items, Defendants filed a motion to compel production of all documents responsive to Defendants requests for production and responses to Interrogatories Nos. 22 and 23 (the “Motion to Compel”). (ECF No. 65 at 6-7.) Plaintiffs failed to respond to that motion. (ECF No. 67 at 1.) On July 21, 2016, the Court granted Defendants' Motion to Compel and provided:

The Plaintiffs are ordered to (1) produce responsive documents to each of Defendants' Requests for Production or to confirm in writing that, following a good faith search, no responsive documents exist; and (2) provide Defendants with the information sought in Defendants' Interrogatories Nos. 22 & 23 within fourteen days of the date of this order.
The Plaintiffs are warned that, henceforth, failure to comply with proper discovery requests, discovery obligations, or orders of this court will lead to dismissal of the complaint.

(the “July 2016 Order”) (Id. at 2.)

         The Report finds that, “[f]ollowing this Order, Plaintiffs produced an additional set of documents but failed to provide written confirmation that they had conducted a good faith search and produced all responsive documents, nor did they provide written responses to Interrogatory Nos. 22&23, in contravention of the Court's Order.” (ECF No. 118 at 3.)

         Addressing Defendants' Exclusion Motion, the Magistrate Judge found the following facts, which Plaintiffs generally do not dispute:

On August 16, 2016, disclosure of expert witnesses, pursuant to the parties' Scheduling Order and Federal Rule of Civil Procedure 26(a)(2), was due for “Plaintiff (or any party with burden of proof.)” Plaintiffs did not provide any expert disclosures. On September 16, 2016, the disclosure of “Defendant's (or opposing party) rule 26(a)(2) expert information” was due, and Defendants met this deadline, serving [Plaintiffs] with their expert report on that date. On October 14, 2016, Plaintiffs served Defendants with a report that they classify as a rebuttal expert report.

(Id.) Plaintiffs' counsel acknowledges that the expert report Plaintiffs furnished Defendants did not include the expert's curriculum vitae, a list of cases in which he had testified, or the terms of his compensation. (ECF No. 121-1 ¶ 9 at 3.) Plaintiff's counsel provided that information after Defendants had filed the Exclusion Motion. (Id.)

         Addressing Defendants' Pretrial-Disclosure Sanctions Motion, the Magistrate Judge found: “The present case was set for trial on April 17, 2017. Accordingly, Plaintiffs were required to disclose their exhibits and witnesses they intended to present at trial by March 20, 2017. Plaintiffs missed this deadline.” (ECF No. 118 at 3.) The Magistrate Judge found that “Defendants did not receive Plaintiffs' exhibit or witness lists until two business days before this Court's deadline for filing motions in limine.” (Id. at 9; see ECF No. 86 at 4.) Two business days before the motions-in-limine deadline was March 30, 2016.[2] Plaintiffs do not object to the Magistrate Judge's finding that they did not disclose their trial exhibits and witnesses by March 20, 2017. (See ECF No. 121 at 10-11.)

         The Magistrate Judge found that Plaintiffs' counsel had failed to timely respond to requests and interrogatories, in violation of Rule 37(d), and had failed to comply with the Court's July 2016 Order, in violation of Rule 37(b).[3] (ECF No. 118 at 4.) The Magistrate Judge considered whether dismissal would be an appropriate sanction for Plaintiffs' failure to comply with discovery obligations based on the following factors:

(1) whether the party's failure to cooperate in discovery is due to willfulness, bad faith, or fault;
(2) whether the adversary was prejudiced by the dismissed party's failure to cooperate in discovery;
(3) whether the dismissed party was warned that failure to cooperate could lead to dismissal; and
(4) whether less drastic sanctions were imposed or considered before dismissal was ordered.

(Id. (quoting Harmon v. CSX Transp., Inc., 110 F.3d 364, 366-67 (6th Cir. 1997)).) The Magistrate Judge recommends finding that all four factors have been met and that dismissal is proper. (Id. at 4, 6.) The Magistrate Judge also recommends that dismissal would be proper under Rule 37(c) because Plaintiffs failed to disclose their trial exhibits and witnesses 30 days before trial, as required by Rule 26(a)(3). (Id. at 8-9.) The Magistrate Judge found the “sanction of dismissal appropriate given Plaintiffs' counsel's extreme pattern of abuse of deadlines, failure to comply with Court Orders, and clear warning given that failure to do so would lead to dismissal.” (Id. at 10.) If the Court were to find that dismissal is not an appropriate sanction, the Magistrate Judge recommends granting Defendants' Exclusion Motion and excluding the proposed testimony and report of Plaintiffs' expert witness under Rule 37(c)(1) because Plaintiffs failed to timely disclose their expert and, when they did so, the disclosure was inadequate, both in violation of Rule 26(a)(2). (Id. at 6-8.)

         Plaintiffs object to the Magistrate Judge's recommendations and contend that Defendants' sanctions motions should be denied. (ECF No. 121 at 3.) Defendants counter that the recommendations should be adopted and the case dismissed or that, alternatively, Plaintiffs should be prohibited from calling their witnesses, including their expert witness, or presenting their exhibits at trial. (ECF No. 122 at 30.)


         Congress enacted 28 U.S.C. § 636 to relieve the burden on the federal judiciary by permitting the assignment of district-court duties to magistrate judges. See United States v. Curtis, 237 F.3d 598, 602 (6th Cir. 2001) (citing Gomez v. United States, 490 U.S. 858, 869-70 (1989)); see also Baker v. Peterson, 67 F. App'x 308, 310 (6th Cir. 2003). For dispositive matters, including motions to involuntarily dismiss an action, “[t]he district judge must determine de novo any part of the magistrate judge's disposition that has been properly objected to.” Fed.R.Civ.P. 72(b)(3); 28 U.S.C. § 636(b)(1). For nondispositive pretrial matters, the district judge may reconsider the magistrate judge's disposition if it is “‘clearly erroneous or contrary to law.'” Curtis, 237 F.3d at 603 (quoting 28 U.S.C. § 636(b)(1)(A)).

         On de novo review, after reviewing the evidence, the court is free to accept, reject, or modify the magistrate judge's proposed findings or recommendations. 28 U.S.C. § 636(b)(1). The district court is not required to review -- under a de novo or any other standard -- those aspects of the report and recommendation to which no objection is made. Thomas v. Arn, 474 U.S. 140, 150 (1985). The district court should adopt the magistrate judge's findings and rulings to which no specific objection is filed. Id. at 151. Arguments made in an objection to a magistrate judge's report and recommendation that were not first presented to the magistrate judge for consideration are deemed waived. See, e.g., Becker v. Clermont ...

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