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Specialtycare IOM Services, LLC v. Medsurant Holdings, LLC
Citation: Not availableDocket: M2017-00309-COA-R3-CV
Court: Court of Appeals of Tennessee; July 6, 2018; Tennessee; State Appellate Court
Original Court Document: View Document
The Court of Appeals of Tennessee ruled on March 28, 2018, in the case of SpecialtyCare IOM Services, LLC v. Medsurant Holdings, LLC, et al., concerning an appeal by Appellant Medsurant from a default judgment imposed by the trial court as a discovery sanction. The appellate court found insufficient evidence of contumacious conduct by Medsurant to justify the default judgment on liability, leading to a reversal of that judgment. Additionally, the court vacated the damages awarded based on the jury verdict while affirming the award of attorney's fees as an initial discovery sanction. The case involves two competing companies in the intraoperative neurophysiologic monitoring (IOM) services sector, with SpecialtyCare being the larger provider. Both companies had previously sought to acquire another IOM company, ProNerve, during its bankruptcy. After entering confidentiality agreements, they accessed sensitive information, but SpecialtyCare ultimately won the bid for ProNerve, which it communicated to ProNerve's employees with job offers contingent on bankruptcy court approval. Ninety-one ProNerve IOM technicians joined SpecialtyCare, while 23 found employment elsewhere, and nine took positions with Medsurant. Each had restrictive covenant agreements with ProNerve. On June 10, 2015, SpecialtyCare sued Holdings and Medsurant for four business torts: (1) Medsurant's intentional inducement of ProNerve employees and customers to breach contracts (Counts I and II), and (2) tortious interference with existing or prospective business relationships (Counts III and IV). SpecialtyCare filed amended complaints in November and December 2015, with Medsurant denying liability. SpecialtyCare alleged Medsurant's non-cooperation in discovery, leading to a motion to compel filed on November 4, 2015. Following failure to comply with the order, SpecialtyCare sought discovery sanctions. Medsurant's attorney withdrew on January 21, 2016, and new counsel was substituted with SpecialtyCare's non-opposition. The trial court imposed an initial sanction requiring Medsurant to pay SpecialtyCare's attorney fees due to discovery delays and warned of potential default judgment for continued noncompliance. A default judgment was entered against Medsurant on May 3, 2016, which it sought to set aside in hearings on August 5 and 12, 2016. On August 15, 2016, the court awarded SpecialtyCare $119,815.77 in attorney fees for discovery sanctions. The trial court denied Medsurant's request to overturn the default judgment on liability on August 24, 2016. The jury trial on damages occurred from August 22 to 26, 2016, resulting in a $2.8 million compensatory damage verdict and a $16 million punitive damage verdict due to Medsurant's destruction of evidence. The trial court confirmed the damages on September 20, 2016, affirming the jury's decision and the attorney fee award. Medsurant's post-trial motions were denied on January 18, 2017, leading to an appeal. Medsurant raises five critical issues in its appeal: 1. The Chancery Court allegedly erred in imposing a default judgment against the Defendants as a discovery sanction, asserting that it was the first sanction imposed, accompanied by a significant monetary penalty, and that the discovery failures were not willful. Medsurant contends that the plaintiff experienced no substantial prejudice and that the Defendants made prompt and significant efforts to address the prior counsel's discovery issues. 2. Medsurant argues that the Chancery Court incorrectly applied the default judgment by determining that it established liability and causation for all damages claimed by SpecialtyCare, thereby allowing SpecialtyCare to recover damages not warranted. 3. It is claimed that numerous errors during the trial collectively deprived the Defendants of a fair trial. 4. Medsurant contends that the punitive damages awarded are excessive, infringe upon the Defendants' due process rights, and should either be voided or significantly reduced. 5. The Chancery Court allegedly erred in ruling that the Defendants waived their right to contest several critical elements of its decision. Regarding the imposition of the default judgment as a discovery sanction, appellate courts review such decisions under an abuse of discretion standard. An abuse of discretion occurs when the trial court employs an incorrect legal standard or renders an illogical decision causing injustice. Discretionary decisions must adhere to sound legal principles and established guidelines. Additional relevant facts include that the lawsuit was initiated on June 10, 2015, with SpecialtyCare serving Medsurant multiple discovery requests shortly thereafter. Medsurant requested an extension for its responses, citing the breadth and volume of the requests, as well as arguing that the interrogatories exceeded the local rule limit without court permission. However, Medsurant did not provide responses to the discovery requests. On August 21, 2015, SpecialtyCare opposed Medsurant’s motion for an extension of time and filed a motion to compel discovery. The trial court held a hearing on September 4, 2015, where it instructed Medsurant to provide discovery responses by September 11, 2015, agreeing to preserve its objections for later review. The court acknowledged the urgency of the case due to serious allegations potentially leading to substantial damages for SpecialtyCare. Following the deadline, the court reconvened on September 21, 2015, noting Medsurant produced approximately 400 pages of documents. SpecialtyCare renewed its motion for a waiver of Medsurant’s objections, and the court addressed each discovery request, granting Medsurant 30 days to comply with the clarified requests. The hearing on three remaining requests was continued. The parties discussed a protective order regarding the sensitive nature of the requested documents. Medsurant’s attorney proposed a modified “Attorney’s Eyes Only” provision, allowing access to only two managerial employees of Medsurant to balance the need for confidentiality with the ability to prepare a defense. On September 21, 2015, SpecialtyCare responded to Medsurant's interrogatories, lodging objections and marking some responses as "Attorney’s Eyes Only." On September 22, 2015, SpecialtyCare's attorney communicated the designation of certain answers and documents as "Attorney’s Eyes Only" and proposed modifying the protective order to "Outside Counsel Only" to address concerns raised by Medsurant. Medsurant's attorney informed SpecialtyCare, via email, that they had already sent discovery responses to their clients before receiving SpecialtyCare's email. Following this, SpecialtyCare expressed serious concern over the unauthorized disclosure of information marked "Attorney’s Eyes Only" (AEO) to Medsurant's clients, emphasizing that there was no agreement allowing such sharing and that the selective redaction of AEO information was improper. SpecialtyCare demanded the identities of all individuals who received the AEO information and requested the retrieval of any improperly shared materials. Medsurant's attorney responded by criticizing SpecialtyCare's actions as irregular and asserting that they had not recognized the AEO designation when sending the information. Medsurant's attorney reiterated a commitment to maintain the AEO status of shared information but questioned SpecialtyCare's refusal to produce other non-AEO documents. SpecialtyCare's attorney expressed disappointment and indicated that failure to comply with their demands would lead to court action. Subsequently, SpecialtyCare filed a motion for a protective order and the return of AEO-designated information, while Medsurant filed a motion to compel SpecialtyCare to produce withheld discovery requests, which SpecialtyCare opposed. On October 12, 2015, Medsurant communicated to SpecialtyCare’s attorneys that its discovery responses were "woefully deficient," requesting supplementation by October 26, 2015, and warning of potential court intervention if SpecialtyCare did not comply. Medsurant's letter specified the information sought for each interrogatory objected to by SpecialtyCare. Following this, a court hearing on October 13, 2015, led to the consolidation of hearings on cross-motions to compel and a motion for a protective order. On November 4, 2015, the trial court issued an order detailing Medsurant's discovery requirements, after which Medsurant submitted approximately 400 pages of supplemental responses. On November 11, 2015, SpecialtyCare responded to Medsurant's October 12 letter, arguing that its responses were appropriate and addressing specific disputed interrogatories, including a claim that Medsurant's assertion of deficiencies lacked specificity. On November 20, 2015, Medsurant filed another motion to compel, alleging SpecialtyCare's responses were "evasive and incomplete." In response, SpecialtyCare claimed Medsurant’s requests were excessively broad. The trial court reviewed the motions on December 4, 2015, and on January 6, 2016, partially granted and partially denied Medsurant's motion to compel, specifically ordering SpecialtyCare to supplement its answer regarding the categories and amounts of damages sought, if known. SpecialtyCare is allowed to qualify its damage claims based on currently available information, which may evolve as discovery progresses and will be updated following full responses from the Defendants. The Court requires SpecialtyCare to clarify how it calculated its losses and damages unless such calculations were conducted by its attorneys. Medsurant Holdings requested details about revenue from procedures at specific medical centers from 2013 onwards and sought related documents. The Court partially granted Medsurant's motion to compel, ordering SpecialtyCare to provide monthly revenue for 2014 and 2015, but not for 2013, and noted that the requests for documents were unintentionally omitted from its ruling and may be revisited. After the court's ruling on November 4, 2015, Medsurant submitted additional documents. SpecialtyCare then addressed Medsurant's noncompliance with the court order in a letter dated January 11, 2016, detailing the failures to comply. On January 15, 2016, SpecialtyCare agreed to substitute Medsurant’s new counsel, provided it would not delay compliance with discovery orders. SpecialtyCare highlighted ongoing issues with Defendants’ lack of timely responses to discovery requests, which necessitated multiple motions to compel and numerous hearings. They expressed intent to oppose any further delays in compliance with the Court's orders. Defendants have obstructed Medsurant’s attempts to secure a protective order, resulting in delays in discovery responses. They have rejected a proposed scheduling order and demanded the inclusion of Medsurant Holdings' subsidiaries as defendants, despite Medsurant Holdings having control over relevant documents. Defendants have also filed motions to compel for irrelevant information and failed to draft an order in line with court rulings, leading to further delays. SpecialtyCare filed a motion for discovery sanctions against Medsurant, claiming non-compliance with a prior order and seeking a default judgment or limitations on Medsurant’s evidence. Medsurant contested these sanctions, arguing that SpecialtyCare misrepresents the timeline and that there are no active deadlines or trial dates. Medsurant asserts it has been responsive to discovery requests and has made necessary amendments. The court subsequently issued a protective order for confidential information, allowed Medsurant’s former counsel to withdraw, and established a trial date for August 22, 2016, with all discovery due by June 10, 2016. During a hearing on the sanctions, the trial judge acknowledged significant time spent resolving discovery disputes and confirmed understanding of prior orders with Medsurant’s former counsel. Medsurant's former attorney acknowledged to the court that clarification was needed and that the information submitted to the plaintiffs was all they received from their client. The court postponed the motion for sanctions for two weeks, indicating that while sanctions were likely, a default judgment was uncertain and would depend on attorney cooperation. The court ordered Medsurant to provide SpecialtyCare with specific information regarding nine former ProNerve employees by February 26, 2016, including their previous and current employment details and physician contacts. At the continued hearing, SpecialtyCare reported receiving 120 pages of documents late and an additional 350 pages shortly after, which they had not yet reviewed due to attachment issues. SpecialtyCare argued that ongoing deficiencies warranted relief, including reimbursement for incurred attorney fees, citing Medsurant's failure to produce required electronic documents as ordered. In response, Medsurant's new attorney acknowledged the slow flow of information from defendants but asserted significant efforts had been made to compile and produce the necessary information since the last hearing. New counsel for the defendants has significantly increased diligence in gathering requested information, contrasting with prior counsel's slow progress. The trial court acknowledged delays in information production but appreciated the new counsel's efforts to compel Medsurant to provide documents. Medsurant's attorney reported that electronic searches for communications between former employees and former ProNerve hospital customers yielded minimal results, with many employees returning zero hits for responsive documents. The trial court highlighted the availability of a server containing electronic information, suggesting that it could facilitate the production of requested data, despite the potential costs associated with such retrieval. Medsurant’s attorney clarified that their technicians, who make up the majority of the employees in question, do not typically communicate with surgeons or facilities via email or text, which might explain the lack of anticipated documents. SpecialtyCare’s attorney pointed out that their requests for documents extend beyond just expense reports and employment files, indicating an expectation for a broader range of documents. The trial court expressed anticipation that emails related to the requests would soon be provided, not only for the specific individuals mentioned but for all relevant parties. Medsurant’s attorney reiterated the search conducted for Chaney, Pierce, and Clark, confirming that these employees had disclosed their interactions with customers at ProNerve. A search was conducted of Medsurant's email to identify any communications with former customers since employment commenced, but it appears either those records are missing or were produced only recently. The primary focus of the requested documents includes communications between technicians and surgeons at ProNerve, which have been produced but are limited in scope. A commitment was made to supplement or confirm the completeness of document production by the following Wednesday. The trial court expressed frustration over delays in discovery and indicated a possible inclination to grant a default judgment as a sanction for noncompliance. The court emphasized that the defendants, despite their intelligence and business acumen, have not provided the necessary information, which should have been readily available. The judge noted a history of noncompliance and warned that continued failure to produce the required documents could lead to a hearing on damages. Medsurant’s attorney acknowledged the situation and expressed hope that recent document production would demonstrate compliance, but the judge reiterated the serious implications of the defendants' lack of cooperation and the time wasted by the plaintiffs in pursuing the information. The court has decided to award some attorneys' fees to SpecialtyCare due to Medsurant's inadequate document production, despite not granting a full award. SpecialtyCare highlighted that they received a substantial volume of documents (7,000 pages) shortly before the hearing, which they argued indicates either deliberate withholding or negligence in searching for the documents. Their counsel claimed that Medsurant engaged in selective production by omitting crucial email attachments and providing documents that contradicted previous assertions about non-existent emails. Medsurant's attorney countered that they had fully complied with discovery obligations and any minor omissions were inadvertent rather than intentional. They maintained that all relevant documents had been produced and were up-to-date, and offered to clarify the search terms used in their document retrieval process. This discussion occurred during a reconvened hearing on March 3, 2016, focusing on the sanctions motion. Defendants have invested three weeks reviewing records to produce all potentially relevant documents in the case. They acknowledge that some items may have been missed but commit to providing any additional documents as they are identified, arguing that a continuous court presence is unnecessary. Medsurant's attorney proposed appointing a special master to manage ongoing discovery issues, emphasizing that there is no intent to conceal information. However, the trial court declined this request, stating that it has gained significant insight into the case and feels capable of managing discovery matters itself. The court expressed appreciation for the efforts made by the new counsel and indicated that while a default judgment is a possibility, it prefers a resolution on the merits. The court noted a significant effort by Medsurant to hire individuals from ProNerve, suggesting possible discovery abuses by the defendants. It indicated that sanctions are warranted, beyond merely awarding attorneys’ fees, and instructed the parties to submit supplemental briefs on the issue. Following the submission of these briefs, the trial court reconvened to hear SpecialtyCare’s motion for sanctions, where it reiterated that while Medsurant's attorney has been cooperative, the ongoing lack of document production is damaging to SpecialtyCare. The court reaffirmed its stance on the appropriateness of sanctions, expressing hesitation about granting a default judgment but acknowledging the need for a remedy due to the discovery abuses observed. Medsurant actively solicited nine employees from ProNerve, interfering with SpecialtyCare’s contractual and business relationships. SpecialtyCare was aware of these relationships and had expectations upon acquiring ProNerve's assets. Medsurant intentionally induced the breach of contract related to this asset purchase. Sanctions are warranted against Medsurant for noncompliance with prior court orders, specifically for liability covering SpecialtyCare’s attorney’s fees from the filing of the motion for sanctions. Additionally, Medsurant's failure to provide requested documentation, inconsistent responses in interrogatories, and ongoing delays justify a default judgment. On May 3, 2016, the trial court issued a default judgment against Medsurant due to its noncompliance with discovery requests, following multiple hearings where the court expressed dissatisfaction with the defendants' discovery abuses. Initial orders required the defendants to produce specific information about the employees, but compliance was inadequate. After producing only 467 pages of documents at first, a subsequent hearing revealed continued deficiencies, prompting the court to indicate it was leaning towards granting a default judgment. Although the defendants later produced nearly 7,000 pages of documents, relevant materials, including attachments to emails, remained unproduced by the March 3, 2016 hearing, despite assurances from the defendants' counsel to correct these omissions. The Court indicated significant issues with the Defendants' discovery practices during a hearing on March 3, 2016, noting a deliberate effort to recruit individuals from ProNerve and misrepresent their status as the new acquirer. The Court highlighted the substantial delay in document production, which amounted to about 7,000 pages, and deemed this delay as an abuse of the discovery process, warranting sanctions beyond just attorneys' fees. A final hearing on SpecialtyCare's Motion for Sanctions was scheduled for April 21, 2016. Despite previous hearings addressing Defendants’ discovery deficiencies and numerous ultimatums to comply, Defendants eventually offered to discuss their electronic discovery searches. However, it was revealed that they had only searched for documents for one month and had not adequately addressed their discovery obligations over the preceding seven months. The telephonic conferences with SpecialtyCare exposed a continued lack of proper search methodology, which excluded relevant documents and failed to comply with the Court’s orders. The Court had mandated Defendants to either produce all ordered documents or affirmatively state the absence of additional documents, yet by the April 6, 2016 hearing, Defendants had not fulfilled these requirements. Their failure to conduct an appropriate search for electronic information was compounded by the unqualified individual responsible for the searches, who was neither trained nor certified in the tools used, resulting in non-compliance with the Court's orders. Defendants were informed of missing documents by SpecialtyCare during a March 3, 2016 hearing but failed to supplement their document production before the April 6, 2016 hearing, despite having ample opportunity to do so. The trial court noted that Medsurant's discovery abuses were evidenced by contradictions between their sworn interrogatory responses and the deposition testimonies of Messrs. Klear and Lincoln. The court highlighted its considerable investment of time, with seven hearings totaling over 12 hours, addressing Defendants’ non-compliance with discovery orders. Despite multiple warnings regarding the potential for a default judgment due to their repeated failures, Defendants did not comply with the court’s directives, and their eventual discovery responses were described as evasive and incomplete. The court concluded that the delays and non-compliance were entirely the responsibility of the Defendants, with no indication that SpecialtyCare contributed to these issues. The court affirmed that SpecialtyCare’s claims warranted relief against Defendants and indicated that a default judgment was justified given the clear record of delay and contumacious conduct. Under Tennessee Rules of Civil Procedure 37.04 and 37.02(C), the court has the authority to impose severe sanctions, including dismissal of the action, for failure to comply with discovery rules. Dismissal is considered a harsh sanction and is exercised with caution. The court's inherent power to impose sanctions is most effective when exercised with discretion and restraint, ensuring that punishment fits the offense and is applied sparingly to maintain its significance. Sanctions should not be frequent, as their overuse diminishes their impact. The Tennessee Supreme Court emphasizes that cases should ideally be resolved on their merits, although trial judges require a broad range of sanctions to manage their dockets effectively and deter misconduct. Dismissal of cases is considered a severe sanction and is generally avoided when lesser alternatives are available. Appellate courts approach dismissals under Tenn. R. Civ. P. 37.02(C) with caution. The case of Shahrdar v. Global Housing illustrates the application of sanctions for noncompliance with discovery requests. In that case, a plaintiff sought default judgment due to the defendants' inadequate responses to discovery, which the trial court granted. The appellate court upheld this decision, citing the defendants' uncooperative behavior and lack of compliance with the court's orders. Other cases have similarly supported the imposition of default judgments as appropriate sanctions for discovery violations. In American Steinwinter Investor Group v. American Steinwinter, Inc., the court upheld a default judgment due to the defendant's refusal to comply with discovery orders without a valid excuse, highlighting a pattern of egregious disregard for the judicial process. Similarly, in Galde v. Keritsis, the court affirmed a default judgment because the defendant failed to attend depositions and trial, displaying contempt for the judicial process through repeated noncompliance. In Potts v. Mayforth, a default judgment was also affirmed when the defendant not only failed to respond to discovery requests but also committed perjury in his interrogatory responses. The court in Murray v. Christian Methodist Episcopal Church summarized that default judgments may be warranted when there is a repeated failure to respond to discovery, lack of reasonable excuse, perjured responses, or significant delays. It noted that such extreme sanctions are justified only in cases demonstrating a clear record of delay or contumacious conduct, which is described as willfully stubborn or scornful behavior towards the court. The definition of "contumacious" encompasses actions that are seen as egregiously disrespectful to the judicial process. The document emphasizes that to warrant a default judgment, a party's noncompliance must result in delays and exhibit scornful or obstinate behavior. An example includes Alexander v. Jackson Radiology, where the plaintiff engaged in serious discovery abuse by taking an incriminating exhibit during a deposition and subsequently lying under oath about its disappearance, demonstrating contemptuous conduct. A court must carefully balance circumstances when determining appropriate sanctions, as established in Alexander, where the trial court's dismissal of Dr. Alexander's lawsuit was upheld due to his actions violating fundamental judicial principles. However, dismissals based on discovery abuse are subject to an abuse of discretion review, and a court oversteps if there is no evidence of willful or dilatory conduct by the non-moving party, as demonstrated in Pegues and Murray. In Pegues, the dismissal of a personal injury case against a railroad was vacated because the plaintiff's late response did not indicate disregard for the court’s order; he had made efforts to comply within the established scheduling order. Similarly, in Hogan, the court found no basis for dismissal as the plaintiff attempted to adhere to the court's directives. In March v. Levine, a default judgment was reversed when the husband failed to comply with a deposition order, despite his claims of financial hardship, which were deemed unconvincing. Overall, the courts emphasize that the sanction of dismissal is inappropriate when parties have made genuine attempts to comply with discovery orders. The trial court rejected the husband's proposals and scheduled his deposition in Nashville, which he failed to attend. After a second notice and an order for the husband to confirm his attendance, he still did not inform the court or appear. As a result, the court considered the plaintiffs' motion for sanctions and granted a default judgment against the husband, which he later sought to have set aside. The appellate court reversed this decision, finding the default judgment to be excessively severe given the circumstances and noting that reasonable doubt existed regarding the husband's conduct. It also highlighted that the plaintiffs shared responsibility for some litigation issues. In a related case, a contractor sued a church for breach of a construction contract due to non-payment. After initially resisting service, the church was served through the Secretary of State. The contractor filed a motion to compel discovery when the church failed to respond to discovery requests, which the court denied but expressed displeasure with the church's delayed responses. A subsequent motion to compel and for sanctions was filed by the contractor, leading the trial court to mandate that the church fully respond to outstanding discovery requests. The grant of sanctions was deferred pending the litigation's outcome, but after a status conference, the court awarded sanctions against the church. The trial court allowed the church's attorney to withdraw and granted the church an additional five days to respond to discovery requests, which the church ultimately failed to do. The church claimed that further responses would be futile, asserting it was not a proper party to the action. During a hearing on sanctions on October 10, 2001, the trial court found the church's discovery responses inadequate and concluded that the church engaged in a pattern of discovery abuse. Consequently, a default judgment was entered in favor of the contractor on October 15, 2001, along with an award of compensatory and punitive damages. On appeal, the church argued the sanctions were overly harsh. The appellate court determined that the church's conduct did not meet the standard for contumacious behavior necessary to justify such severe sanctions. The church maintained its stance as an improper party throughout the litigation and had shown minimal discovery misconduct by filing belated responses. Critically, the inadequacy of these responses was not raised until eight months after they were submitted, and the only order to compel came when the church lacked legal representation. The appellate court compared the case to precedents where harsher sanctions were upheld, noting that delays in this case were significantly shorter. In contrast to cases like Shahrdar, which involved delays of over eighteen months, this case experienced only about four months of delay from the discovery deadline to dismissal. The appellate court found that American Express had responded to discovery requests, albeit late, with no judicial order declaring those responses insufficient. The timeline of events indicated that the case was resolved much quicker than previous cases that warranted default judgments, leading to the reversal of the trial court's sanctions. American Express provided an explanation for its failure to timely respond to interrogatories through an affidavit from its custodian of records, indicating that the delay was due to excusable neglect. Unlike the party in Steinwinter, American Express was not found to be evasive or willfully noncompliant with the discovery process. Although American Express did not comply with the trial court's order to respond to discovery promptly, this behavior did not meet the threshold for contumacious conduct necessary for dismissal with prejudice. Default judgment is inappropriate as a sanction unless there is a clear record of delay or contumacious conduct. Relevant cases establish that default judgment may not be warranted if discovery responses are submitted within the trial court's scheduling order, if the delay is due to excusable neglect, if both parties share responsibility for the delays, or if the delay is relatively short (less than one year). A timeline of the proceedings includes the filing of SpecialtyCare's lawsuit on June 10, 2015, the serving of interrogatories to Medsurant on July 10, 2015, and subsequent motions to compel and protective orders related to discovery disputes. The trial court provided specific deadlines for Medsurant to respond to discovery requests, and by September 21, 2015, Medsurant had produced approximately 400 pages of documents. Email communications revealed issues regarding the disclosure of allegedly privileged information, leading to a protective order being entered on January 29, 2016. The trial court ultimately ruled in favor of SpecialtyCare's motion to compel on November 4, 2015, outlining Medsurant's discovery obligations. On November 4, 2015, Medsurant submitted 400 pages of supplemental responses, which SpecialtyCare found inadequate, prompting SpecialtyCare to file its first amended complaint on November 12. Medsurant then filed a second motion to compel on November 20. A hearing on this motion took place on December 4, during which the trial court clarified SpecialtyCare’s discovery obligations. SpecialtyCare submitted a second amended complaint on December 30, followed by Medsurant producing an additional 412 pages on January 6, 2016. However, SpecialtyCare notified Medsurant of continued noncompliance on January 11, leading to a letter outlining discovery issues on January 15. Ogletree, Deakins, Nash, Smoak & Stewart sought to withdraw as Medsurant’s counsel on January 21. SpecialtyCare moved for discovery sanctions on January 25, less than six months after initial discovery requests. The trial court allowed Medsurant's original attorneys to withdraw and appointed new counsel on February 22, issuing a scheduling order for a jury trial on August 22, 2016, with all discovery to be completed by June 10, 2016. Hearings regarding SpecialtyCare’s motion for sanctions were held on February 12 and February 26, with Medsurant providing approximately 500 additional pages on the latter date. Despite Medsurant’s submission of around 7,000 pages by March 2, SpecialtyCare claimed gaps remained in the discovery responses. The trial court denied Medsurant's request for a special master to resolve discovery disputes and granted attorney's fees as an initial sanction. On April 6, the court reconvened the sanction hearing and subsequently granted a default judgment on May 3, 2016. The timeline from the initial complaint filed on July 10, 2015, to the default judgment was less than one year. SpecialtyCare had been proactive in seeking sanctions early in the discovery process, filing a motion to compel by August 21, 2015. Both parties experienced delays; SpecialtyCare objected to Medsurant’s discovery requests and initially withheld further discovery pending a protective order, despite having provided responses without such an order. This situation resulted in Medsurant filing a cross-motion to compel. SpecialtyCare's failure to respond to Medsurant's discovery requests did not exempt Medsurant from responding to SpecialtyCare's requests; however, SpecialtyCare's delay extended the overall discovery timeline. The initial hearings, which clarified discovery requests, should not be considered detrimental to Medsurant. Following a court order on November 4, 2015, Medsurant produced additional discovery, but SpecialtyCare deemed it inadequate. After hiring new counsel, Medsurant submitted an additional 400 pages in January 2016, yet SpecialtyCare again claimed insufficiency. On January 25, 2016, SpecialtyCare sought discovery sanctions, including default, less than seven months after its initial request. While Medsurant's initial electronic searches were flawed due to untrained IT staff, there was no evidence of intentional delay. Medsurant's former counsel did not timely address these eDiscovery issues with the court, compounding delays. However, once new counsel was engaged, eDiscovery problems were quickly rectified, with substantial document productions made by the deadlines set by the court. Medsurant produced about 500 pages by February 25, 2016, and an additional 7,000 pages by March 2, 2016. The court subsequently imposed attorney’s fees as sanctions for discovery issues shortly after the last production. On April 6, 2016, the trial court announced a decision to grant default judgment against Medsurant as a discovery sanction, formally entering the order on May 3, 2016, despite a previously established discovery deadline of June 10, 2016. The trial court had set this deadline in a scheduling order on February 22, 2016, but entered the judgment over a month early. SpecialtyCare raised concerns about Medsurant's discovery responses, describing them as having "gaps" and being "woefully deficient," yet provided limited specifics on what was missing. The trial court identified substantial deficiencies in Medsurant's discovery, noting excluded relevant documents and inadequate electronic searches that failed to produce responsive documents. It acknowledged that parties are not required to disclose electronically stored information from sources deemed not reasonably accessible due to undue burden or cost, and the party resisting discovery must demonstrate this unreasonableness. The court may still compel discovery if good cause is shown. However, the trial court's order lacked detail on what specific documents were missing from Medsurant’s production, and records indicated ongoing negotiations between the parties regarding the search terms. The trial court also found evidence suggesting that Medsurant may have employed individuals previously working for ProNerve, implying that Medsurant's production could have been adequate to support SpecialtyCare's claims. In Cohen v. Clarke, the court emphasized that when a trial court imposes severe penalties such as dismissal of a lawsuit, it must clearly explain the violations and how they prejudiced the complaining parties. While some procedural violations may warrant dismissal, the court found this case insufficiently justified for such a penalty. The trial court had noted that defendants repeatedly failed to comply with discovery rules, causing unnecessary delays and potential prejudice to SpecialtyCare, but did not provide specific details on how SpecialtyCare was prejudiced. Oral statements made by the trial court are not legally binding unless documented in a written order. The appellate court concluded that the trial court's lack of specificity in its findings rendered the default judgment erroneous and reversed that decision. The court affirmed the award of attorney’s fees as an initial discovery sanction, vacated the trial court’s award of damages, and remanded the case for further proceedings. Costs of the appeal were divided equally between the appellants and appellee.