Court Issues a Rare, Severe Discovery Sanction: The Path that Led to Default Judgment
A Tennessee Circuit Court recently issued an order granting default judgment as a discovery sanction against Endo Health Services, Inc. in Staubus v. Purdue Pharma, L.P., et al., No C-41916 (Tenn. Cir. Ct. Apr. 6, 2021). We examine many critical takeaways from this order about discovery conduct and expectations of transparency in the discovery process.
In Staubus, Plaintiffs seek $2.4 billion in recovery for exposure to opioids in utero. Plaintiffs sued claiming Endo’s sales force failed to stop suspected prescribers from illegally diverting its opioid products. Endo’s sales representatives engaged with Tennessee prescribers, and communicated about Tennessee prescribers over email. Plaintiffs sought documents demonstrating this knowledge, which the court agreed were essential to the litigation.
The court detailed a long history of Endo’s discovery conduct and perceived evasiveness in the case. The court stated that Plaintiffs repeatedly sought documents reflecting the Tennessee sales force’s knowledge of and response to prescriber diversion and Endo’s Tennessee registration records. Endo and its counsel limited Endo’s production in this case to searches of its MDL collections, which were primarily senior level custodians and did not include Tennessee-specific sales personnel; declined to provide information about the searches or contents of Endo’s productions; and, per the order, misrepresented the completeness of its productions to both Plaintiffs’ counsel and the court.
The Court’s Analysis and Holding
Beginning in 2018, the court issued orders compelling Endo to produce certain records regarding Endo’s knowledge regarding prescribing practices in Tennessee and policies and procedures for addressing potential diversion. Endo did make productions after the order; however, did not specify which records were responsive to the court’s order or whether the production was complete. In 2019, Plaintiffs served additional requests for production specifically demanding files concerning suspect practices by Tennessee prescribers and pharmacies, including compliance-related files. The court noted that Endo responded with 14 pages of general objections and 1-2 pages of specific objections to each request, then agreed to conduct a “reasonable search.” In 2020 as fact discovery was coming to a close, the court ordered the parties to certify that all responsive documents had been produced—and provided what it said was a chance for Endo and its attorneys “to admit their wrongdoing and correct it.” Per the order, Endo instead “doubled down,” certifying its compliance after a “reasonable search.”
Not long after, in May 2020, the court held both Endo and its counsel in contempt “for failing to conduct a reasonable search and for making a series of false statements regarding the same.” The court ordered additional production and forecasted significant sanctions.
After the contempt order, Endo hired separate discovery counsel who negotiated searches of certain custodians, including compliance officials and sales personnel. As a result, Endo produced roughly 170,000 unseen documents. The court held that most of the documents should have been produced in response to the court’s 2018 order to compel and others no later than February 2020 at the time of Endo’s discovery completeness certification. It found the documents were highly relevant and undercut one of Endo’s key defenses (its anti-diversion measures) and directly contradicted Endo deposition testimony. By the end of Endo’s production, all pretrial deadlines had run; the parties had completed expert depositions, fully briefed summary judgment motions, fully briefed motions in limine, exchanged witness lists, and the like.
After additional reports and briefings to the court on the issue of sanctions, the court ultimately entered default judgment, among other sanctions, against Endo under the Tennessee Rules of Civil Procedure, state statutes allowing punishment for contempt, and the state court’s inherent authority to impose sanctions to preserve the integrity of the discovery process. Recognizing the severity of default judgment, the court clarified that “[a]nything less would make a mockery of the attorneys who play by the rules and the legal system.” The court rejected Endo’s proposed alternative to grant additional discovery at Endo’s expense, stating it would essentially require starting discovery over and Plaintiffs should not be forced to choose between going to trial without the new relevant information or delaying the trial for months or a year. Additionally, “Endo and its attorneys [did] not show any remorse, admit their wrongdoing or apologize to opposing counsel or the court for their actions.”
Endo disagrees with many of the statements and findings in the order and has stated that it intends to appeal the decision.
The takeaways from this order are many, some of which are summarized below:
Ensure that attorneys who are well versed in your company’s systems, document collections, searching capabilities, and other discovery functions—as well as experienced in discovery legal strategy—are negotiating and advocating on your behalf and are involved in any discovery certifications. Accuracy and careful attention to detail on these points are critical.
Transparency in the custodians and search parameters being used can feel burdensome at the time of negotiation but can provide guardrails when scope of production questions arise later in discovery and can provide support if a party is required to certify discovery completeness.
When using materials collected for other matters to respond to discovery in a separate case, attempt to gain alignment on what, if anything, additional or jurisdiction specific will be produced.