District Court of New Jersey Sanctions Franchisor For “Misleading” and “Troublesome” Discovery Responses

Last month, the District Court of New Jersey issued an opinion sanctioning 7-Eleven for its “discovery transgressions” in Younes v. 7-Eleven, Civil No. 13-4578 (RMB/JS) (D.N.J. Dec. 11, 2015), a case currently pending in Camden. In Younes, plaintiffs alleged that 7-Eleven wrongfully targeted certain South Jersey franchisees for termination in violation of their franchise agreements. 

Plaintiffs filed a motion for sanctions against 7-Eleven for 7-Eleven’s alleged refusal to adequately respond to plaintiffs’ discovery requests, as well as 7-Eleven’s alleged failure to comply with multiple Court Orders compelling discovery.  In its December 11, 2015 decision, the District Court issued sanctions against 7-Eleven for its discovery transgressions, noting “[n]othing would please the Court more than if it did not have to decide the present motion . . . .”  In doing so, the District Court sent a stern warning to practitioners and litigants that failure to take a reasonable approach to discovery would not be tolerated.  Among the important takeaways from the opinion are the following:

(1)   A Court Order compelling discovery is not a prerequisite to discovery sanctions. 

In response to 7-Eleven’s argument that it could not be sanctioned for any alleged discovery transgressions that occurred prior to any Court Order regarding discovery, the District Court held in no uncertain terms that 7-Eleven was wrong.  The Court explained that “[a] party cannot serve substantially deficient discovery responses with impunity,” explaining that 28 U.S.C. 1927, the Court’s inherent power and Rule 26(g)(3) provided the Court authority to sanction 7-Eleven for conduct 7-Eleven engaged in prior to the Court’s involvement in the discovery dispute. 

(2)   If you reasonably understand what a party is requesting in discovery, and the discovery is not otherwise objectionable, provide the discovery.  Parties play a “gotcha” game at their own risk. 

7-Eleven argued that its failure to provide discovery was justified because plaintiffs did not correctly identify the exact project name – “Project P” – in its discovery requests seeking information regarding projects related to franchise terminations in South Jersey.  Instead, Plaintiffs referred to the project at issue as “Operation Philadelphia.”  The District Court rejected this argument, explaining as follows:

 7-Eleven is playing a ‘gotcha’ game when it argues it did not have to produce Project P discovery because plaintiffs referred to Operation Philadelphia instead of Project P.  In this context these terms are synonymous.  It was not plaintiffs’ burden to specifically identify the term Project P before they received responsive information.  They are franchisees with no knowledge of 7-Eleven’s internal plans.  If a reasonable investigation was done the use of the term ‘Operation Philadelphia,’ in the context of plaintiffs’ representations and theory of the case, and 7-Eleven’s hoard of Project P documents, would have and should have put 7-Eleven on notice that plaintiffs were referring to Project P. . .

Further, the federal rules do not and should not require plaintiffs to use “magic words” to obtain clearly relevant discovery.  The obligation on parties and counsel to come forward with relevant documents requested during discovery is “absolute”.

(3)   Showing that a party spent a substantial amount of money on responding to discovery will not, by itself, be a defense to a claim for discovery sanctions.                 

7-Eleven also attempted to avoid sanctions by explaining to the Court that it had spent a substantial amount of time and money on responding to plaintiffs’ discovery requests.  The District Court was unpersuaded, explaining that “7-Eleven only has itself to blame for its incomplete, duplicative and/or misguided document and ESI searches.  If 7-Eleven had done what it was supposed to do from the outset of discovery its transaction costs would have been substantially reduced.”

In sum, the District Court’s decision reminds practitioners and litigants that parties must take their discovery obligations seriously and, perhaps above all, always, in the Court’s words, “stop and think” about the legitimacy of a discovery response.