United States District Court, D. Minnesota
ORDER AND REPORT AND RECOMMENDATION
Katherine Menendez United States Magistrate Judge
matter is before the Court on State Farm Fire and Casualty
Company's Motion for Sanctions Under Fed.R.Civ.P. 37(b)
and the Court's Inherent Power. [Def.'s Mot., ECF No.
233.] In support of its motion, State Farm asserts that
during discovery Mr. Darmer failed to produce highly relevant
documents that undermine his claims. State Farm seeks a
variety of sanctions. [Defs.' Mem. at 44-48, ECF No. 235;
Defs.' Proposed Order, ECF No. 238.] The Court held a
hearing on State Farm's motion on June 11, 2019. As
explained below, State Farm's motion is granted in part,
and the Court recommends that the District Court permit cross
examination concerning Mr. Darmer's discovery misconduct.
Darmer's St. Paul home was damaged in a fire on November
15, 2016. State Farm insured the home. Mr. Darmer submitted a
claim to State Farm and hired a public adjuster, Troy Brown,
to assist him in resolving the claim with the insurer. Mr.
Darmer asserted that he was entitled to substantial benefits
from State Farm under the relevant policies. He asked State
Farm to pay the policy limits in replacement costs for the
dwelling, and to reimburse for the contents of the home that
were lost in the fire and alternative living expenses while
his home was being rebuilt. Mr. Darmer alleges that State
Farm breached its obligations by failing to pay the full
amount of benefits to which he was entitled.
Original and Amended Repair Contracts
nine months after the fire, on August 23, 2017, Mr. Darmer
entered a “Work Authorization & Contractual
Agreement” (the “Original Repair Contract”)
to have his home rebuilt by Ultimate Restoration, Inc.
(“URI”). [Sixth Williams Aff., Ex. 3, ECF No.
237.] The Original Repair Contract with URI estimated the
cost of rebuilding the home at $954, 385.05. [Id.]
The Original Repair Contract was accompanied by an Original
Repair Estimate reflecting the same rebuilding costs. [ECF
No. 92-1.] However, on the same day that the Original Repair
Contract and Estimate were fully executed, Mr. Darmer signed
an “Amendment to Contract, ” which established a
“[n]ew contract amount … for new rebuild
building for $519, 135.09.” [Sixth Williams Aff., Ex.
5.] Chris Kosek executed both versions of the contract on
behalf of URI. [Id.; id., Ex. 3.] An
“Amended Repair Estimate” corresponds to the
Amendment to Contract and reflects the lower contract amount
of approximately $520, 000. [Sixth Williams Aff., Ex. 7.] On
August 26, 2017, Darmer's public adjuster, Mr. Brown,
submitted the Original Repair Contract to State Farm in
connection with his claim, representing that it governed the
repair work being done. [Id., Ex. 3.] Mr. Brown did
not send State Farm the Amendment to Contract or Amended
Repair Estimate. State Farm was unaware of the amended
contract documents until the discovery process in this
Darmer filed this case in September of 2017. In December
2017, State Farm served Mr. Darmer with requests for
production of documents under Fed.R.Civ.P. 34. [Sixth
Williams Aff., Ex. 51.] One of those requests asked for
production of “[a]ll documents … relating to
… any construction, renovation, improvement
alteration, repair, restoration, destruction, replacement,
… or other services … performed or provided at
any time (before or after the fire) for the
dwelling….” [Id. (Request No. 7).] In
his written responses, Mr. Darmer never referenced the
amended contract documents. [Sixth Williams Aff., Ex. 52
(response to Request No. 7).]
February 1, 2018, Mr. Darmer produced a flash drive including
thousands of pages of documents with no Bates labeling. [Aff.
of Scott Williams (“First Williams Aff.”)
¶¶ 3-4, ECF No. 198.] There is no evidence that
this flash drive contained a copy of the Amendment to
Contract or the Amended Repair Estimate, which reflect the
lower contract price between Mr. Darmer and URI.
early 2018, the Court ordered Mr. Darmer to submit to an
examination under oath (“EUO”) in connection with
his insurance claim. [ECF No. 42 (establishing a two-part EUO
to take place on 4/20/2018 and 4/28/2018).] Just before the
EUO was set to take place, State Farm advised the Court that
Mr. Darmer had produced a large amount of electronically
stored information (“ESI”) on a second flash
drive (the “April flash drive”) containing
“over 20, 000 files with no Bates labels or any other
apparent organization.” [See Order (Apr. 19,
2018), ECF No. 45.] The April flash drive also included
irrelevant information, supporting State Farm's position
that no attempt had been made by Mr. Darmer or his counsel,
Edward Beckmann, to provide State Farm with responsive
information. [First Williams Aff. ¶¶ 10-11.]
September 2018, the Court informed the parties that certain
discovery issues they flagged needed to be addressed through
formal motion practice, rather than the Court's informal
dispute resolution process. [Mins. (Sept. 10, 2018), ECF No.
112.] State Farm filed a motion to compel, arguing in
relevant part that much of the ESI Mr. Darmer produced in the
February and April flash drives was unusable because it
lacked all organization. [Def. Mem. in Supp. of Mot. to
Compel (“MTC Mem.”), ECF No. 197.] The Court
found that Mr. Darmer's production of documents was
“a massive dump of data with little or no effort to
ensure that the information provided to State Farm was
responsive to State Farm's requests.” [Order (Oct.
5, 2018) at 3, ECF No. 218.] The Court ordered Mr. Darmer to
“make reasonable efforts to improve the state of his
document production”; required him to review the
documents produced for relevance and responsiveness; directed
him to determine which documents could properly be designated
as confidential; and instructed him to provide documents with
some organization. [Id. at 3.] Essentially, this
Order alleviated State Farm of having to engage in the
laborious task of sifting through the haphazard data dump on
both flash drvies and required Mr. Darmer and Mr. Beckmann to
take on the ordinary responsibility of making a reasonable
November 1, 2018, State Farm took Mr. Kosek's deposition.
[Sixth Williams Aff., Ex. 4.] Mr. Kosek testified about an
“addendum” to the Original Repair Contract, but
he had not yet produced any documents at the time he was
deposed. [Id.; see also id., Ex. 1 (summary
describing Exhibit 32).] State Farm received URI's
document production on November 20, 2018, for the first time
revealing a copy of the Amendment to Contract with the $520,
000 amount. That same day, Mr. Darmer supplemented his
document production as ordered by the Court on October 5th.
[Sixth Williams Aff. ¶ 3.] There is no indication that
the November 2018 production included the Amendment to
Contract or the Amended Repair Estimate.
Farm took Mr. Darmer's deposition on March 1, 2019. Mr.
Darmer admitted that he signed the Amendment to Contract on
August 23, 2017. [Sixth Williams Aff., Ex. 10 (Dep. at p.
17-18).] Mr. Darmer claimed that he could not remember
whether the Amendment to Contract or Amended Repair Estimate
had ever been provided to State Farm. [Id., Ex. 10
(Dep. at p. 18- 19).]
State Farm had already taken the depositions of Mr. Kosek and
Mr. Brown prior to receiving a copy of the Amendment to
Contract and the Amended Repair Estimate, State Farm
reasonably insisted that it be permitted to take those
depositions again. [Sixth Williams Aff., Ex. 11; see also
id., Ex. 1 (Executive Summary of Ex. 11).] Mr.
Brown's second deposition was taken on May 16, 2019. Mr.
Kosek's second deposition was rescheduled several times,
and eventually took place on May 31, 2019.
Farm's motion for sanctions also addresses Mr.
Darmer's failure to produce copies of certain email
communications he exchanged with Mr. Brown. In its initial
discovery requests in December 2017, State Farm asked Mr.
Darmer to produce “[a]ll … communications
relating to services performed at any time by public
adjuster(s) with regard to Plaintiff's property and/or
Plaintiff's claims arising out of the November 2016
fire….” [Sixth Williams Aff., Ex. 51 (Request
No. 8).] In response, Mr. Darmer generally referenced
documents which had been separately produced by Mr.
Brown's company, DTL Global. [Id. (response to
Request No. 8).] However, as noted above, the February and
April flash drives amounted to an unusable ESI data dump, and
Mr. Darmer was later explicitly ordered to improve the state
of his production.
Farm also served a subpoena on DTL Global, Mr. Brown's
company, in December of 2017. In response to that subpoena,
Mr. Brown produced an array of documents, including several
emails between Mr. Brown and Mr. Darmer. [First Williams Aff.
¶¶ 6-8 & Exs. C, D.] The following list
describes the twelve emails received from Mr. Brown that are
1. Answers to JJJ Letter;
2. Appraiser Ben Johnson Retainer Agreement;
3. Change in Blue;
4. JJJ Response to Letter 4-10-17;
6. Letters from State Farm;
7. Letters to Ryan and ...