Grider v. Keystone Health Plan Central, Inc. No. 08-3074 (3rd Cir. Sept. 1, 2009)

In a September 2007 decision, U.S. District Judge James Knoll Gardner imposed sanctions on several lawyers and their clients for engaging in discovery tactics that the judge said were designed to delay proceedings and drive up the costs of litigation. The Third Circuit Court of Appeals, while upholding the findings of fact and the credibility determinations made by Judge Gardner, vacated the trial court's order of sanctions, since Judge Gardner did not consistently employ the "individualized analysis" that was required of him when considering motions for sanctions.

This case, which stems out of a 2001 case filed by plaintiffs as a putative class action, alleged that the defendants -- Pennsylvania insurers -- conspired to defraud, delay payment, and reduce payments on health insurance claims. After the defense attorneys removed the case to federal court, the parties engaged in protracted discovery aimed primarily at uncovering documents in the possession of the defendant-insurers, which the plaintiffs argued would be the key to the resolution of the case.

Trial Judge Gardner found that counsel for the parties had a great deal of animosity towards one another, and that all the defendants and their counsel had abused the discovery process by, for instance, denying "the existence of documents that Plaintiffs had sought throughout discovery" only later, after crucial junctures in the litigation, "announc[ing] that they had found many of those documents." Furthermore, no defendant, when producing documents, included a privilege log that would have detailed the documents that the defendants claimed were privileged. Ultimately, Judge Gardner found that the most important documents for the litigation were withheld by the defendants, and that the actions of the defendants, including producing thousands of documents on the last day of discovery, were unwarranted and an abuse of process.

Nevertheless, finding that Judge Gardner had not employed the "individualized analysis" necessary when imposing sanctions, the Third Circuit vacated the order for sanctions. The court found that Judge Gardner was justified in his frustration with the parties and that it was difficult for Judge Gardner to pinpoint exact points of sanctionable behavior. However, noting that where the livelihoods of attorneys are at stake, the law requires trial court judges to employ a more specific analysis for sanctions than was used in this case.