S.D. Tex. Awards Sanctions for Failure to Disclose Information About Related Suit

Last Thursday, Judge Gray H. Miller, issued a decision, Garcia v. Vasilia, No. H-17-1601, 2019 U.S. Dist. LEXIS 4371(S.D. Tex. Jan. 10, 2019), granting in part the Plaintffs' motion for sanctions against the MidCap Defendants. This is a FLSA suit brought by drivers for their failure to receive pay when the MidCap Defendants acquired their employer, Graebel Companies, Inc.. A motion for dismiss for lack of personal jurisdiction was granted for one of the MidCap Defendants, but not the other.

The Plaintiffs say that the MidCap Defendants failed to disclose a settlement agreement between themselves, and the owners of the Graebel businesses pursuant to a suit filled in Dallas County. They allege that the settlement should have been taken into consideration by the Court when ruling on the motion to dismiss. The MidCap Defendants contend that the Plaintiffs'discovery requests were overboard. They disclosed that they did not search for or review all electronic communications. The documents the Plaintiffs state should have been disclosed were outside of the electronic discovery agreement signed by the parties. The same lawyers representing the MidCap entities in this case, also represented them in the action in which a settlement was reached. The Plaintiffs sought sanctions under Fed. R. Civ. P. 26(g), which requires attorneys to sign responses to discovery requests attesting to their having made a reasonable inquiry for discoverable materials, and under the Court's inherent authority. Sanctions are usually awarded when an attorney has acted in bad faith.

Judge Miller issued sanctions against the MidCap Defendants for failing to disclose information about the other case. "While the court understands MidCap Funding's argument that electronic documents relating to the Dallas Lawsuit may not have been captured with the search terms in the e-discovery agreement, the Dallas Lawsuit is evidence of contacts with the state, the MidCap Defendants' lawyers were clearly aware of the Dallas Lawsuit, and it should have been disclosed to Plaintiffs during jurisdictional discovery whether documents relating to the lawsuit came up when the search terms were entered or not." Id. at *11. However he declined to grant the Plaintiffs' request that he assert personal jurisdiction over the previously dismissed MidCap Defendant as a form of sanction. He also rejected their request to toll the statute of limitations for plaintiffs who had not yet joined the suit. The Plaintiffs were only awarded attorneys fees charged in connection with the motion for sanctions, and part of the fees for the motion to dismiss.