Ware v. Rodale Press Inc ( 2003 )

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
2-28-2003
Ware v. Rodale Press Inc
Precedential or Non-Precedential: Precedential
Docket 02-1533
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PRECEDENTIAL
Filed February 28, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 02-1533
REGINALD D. WARE;
WARE COMMUNICATIONS, INC.
v.
RODALE PRESS, INC.
Ware Communications,
Appellant
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil Action No. 95-cv-05870)
District Judge: Honorable Herbert J. Hutton
Submitted Under Third Circuit LAR 34.1(a)
January 21, 2003
Before: BECKER, NYGAARD, and AMBRO, Circuit Judges
(Opinion filed: February 28, 2003)
Paul B. Birden, Jr., Esquire
4210 Hamilton Drive
Voorhees, NJ 08043
Attorney for Appellant
Patrick J. Reilly, Esquire
Paul A. McGinley, Esquire
Gross, McGinley, LaBarre &
Eaton, LLP
33 South 7th Street, 4th Floor
P.O. Box 4060
Allentown, PA 18105-4060
Attorneys for Appellee
OPINION OF THE COURT
AMBRO, Circuit Judge:
Appellant Ware Communications, Inc. ("WCI") sued
Appellee Rodale Press, Inc. ("Rodale") for, inter alia, breach
of contract. After repeated noncompliance with discovery
requests and orders, the District Court sanctioned WCI by
precluding it from introducing any evidence of damages at
trial. Because this made it impossible for WCI to establish
a required element of its breach of contract claim, the
District Court dismissed the claim. WCI appeals both the
sanction and dismissal. We have jurisdiction pursuant to
28 U.S.C. S 1291, and affirm.
I. BACKGROUND AND PROCEDURAL HISTORY
This case has a lengthy procedural history, much of
which is not implicated by this appeal. The relevant events
are as follows. In 1992, Reginald Ware and his publishing
company, WCI, approached Rodale, also a publishing
company, with an idea for a magazine. The parties in
December 1993 agreed to publish Rodale’s Heart & Soul, a
healthy lifestyle magazine directed to African-American
women. The operative agreements granted Rodale
termination rights upon thirty days notice if advertising
sales did not meet budget projections. On July 25, 1995,
Rodale informed WCI that it was terminating the contract
on this ground. It also advised WCI that a Rodale employee
had brought sexual harassment allegations against
Reginald Ware personally.
2
WCI and Ware sued Rodale in 1995 in the Eastern
District of Pennsylvania for fraudulent misrepresentation,
breach of contract, and invasion of privacy. Rodale
counterclaimed for sexual harassment. Judge Robert S.
Gawthrop III dismissed the fraudulent misrepresentation
and breach of contract claims. The parties went to trial on
the remaining claims in October 1997, but after the close of
Plaintiff ’s case-in-chief the District Court granted judgment
as a matter of law to Rodale on Ware’s invasion of privacy
claim. Rodale’s sexual harassment counterclaim was
submitted to the jury, which found in favor of Ware. WCI
and Ware appealed the District Court’s dismissal of the
breach of contract claim, and our Court reversed and
remanded this claim.
On remand, WCI and Ware filed an amended complaint
(to be precise, the third amended complaint) alleging breach
of contract, misappropriation, breach of the duty of good
faith and fair dealing, and breach of fiduciary duty.1 In May
2000 the Court dismissed with prejudice all except WCI’s
breach of contract claim.2
Even for that remaining claim, there was pretrial
wrangling. On June 8, 2000, Rodale forwarded to WCI a
Request for Production of Documents and Interrogatories,
which included a request for substantiation of WCI’s
damages calculation. Responses were due one month later.
WCI did not respond. On August 24, 2000, one and a half
months after the response was due, Rodale filed with the
District Court a Motion to Compel. WCI again did not
respond.
On September 19, 2000, the District Court entered an
Order directing WCI to respond to the June 8, 2000,
discovery request and interrogatories within fifteen days.
Once more, WCI did not respond within the required time
period. Two days after the deadline had lapsed, WCI sought
an extension of time. On October 16, 2000, the parties
entered into a Stipulation that extended to October 18,
_________________________________________________________________
1. In August 1999, following the death of Judge Gawthrop, the case was
reassigned to Judge Herbert J. Hutton.
2. This included the dismissal of Ware personally as a party to the suit.
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2000, the deadline for WCI to answer Rodale’s outstanding
discovery requests. The Stipulation provided that"[s]hould
the Plaintiff fail to provide such full and complete
responses, the parties agree that the Plaintiff shall be
prohibited from presenting any evidence in support of its
claim at the time of trial of the within action." WCI timely
replied to the Stipulation, but offered the following
statement as to its damages calculation: "Plaintiff has not
completed its determination of damages. Specifically,
documents that are relevant to Plaintiff ’s calculation are in
the possession of Defendant. Plaintiff will seek to obtain the
documents through discovery."
On October 31, 2000, the District Court entered a
scheduling Order that provided for discovery to close on
January 8, 2001, all dispositive motions to be filed by
January 15, 2001, and the case put into the trial pool on
January 29, 2001. On November 21, 2000, Rodale sent a
letter to WCI indicating dissatisfaction that it had not yet
received an adequate damages calculation. Rodale noted
that the alleged breach of contract occurred over five years
previously. Thus Rodale expected that WCI by this point
knew what damages it had suffered, and "therefore
request[ed] that [WCI] forthwith provide answers to the
interrogatories concerning damages, and provide any
documentation you have to support that." If not, Rodale
indicated that it would "file a motion in limine at the time
of trial asking the Court to prohibit the introduction into
evidence of any damages testimony or other evidence." Yet
again WCI did not respond.
On January 7, 2002 -- the eve of the trial (set to begin
January 14, 2002) and one year (minus one day) after
discovery had closed -- WCI filed a pretrial memorandum
that included a damages calculation. Rodale responded by
a motion in limine to preclude WCI from introducing any
evidence of damages at trial. The trial was postponed, and
on January 23, 2002, the District Court granted Rodale’s
motion. Because WCI thus was precluded from introducing
any evidence in support of a necessary element of its
breach of contract claim, the District Court dismissed the
claim. Ware Communications, Inc. v. Rodale Press, Inc.,
2002 WL 89604 (E.D. Pa. Jan. 23, 2002). This appeal
followed.
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II. EXCLUSION OF EVIDENCE AS A SANCTION
Federal Rule of Civil Procedure 37(b)(2)(B) authorizes a
district court to sanction a party’s failure to comply with a
discovery order by "prohibiting that party from introducing
designated matters into evidence." We previously have
noted that "[a]lthough the exclusion of evidence for violation
of a discovery order is an ‘extreme sanction,’ " a trial court’s
decision to do so "will not be disturbed on appeal absent a
clear abuse of discretion." In re TMI Litig ., 193 F.3d 613,
721 (3d Cir. 1999) (internal citations omitted).
Exclusion under Rule 37(b)(2)(B) is particularly extreme
when the sanction is tantamount to dismissing the claim,
as it was here. In Poulis v. State Farm Fire and Cas. Co.,
747 F.2d 863, 868 (3d Cir. 1984), we explained:
In exercising our appellate function to determine
whether the trial court has abused its discretion in
dismissing . . . we will be guided by the manner in
which the trial court balanced the following factors. . .
and whether the record supports its findings: (1) the
extent of the party’s personal responsibility; (2) the
prejudice to the adversary caused by the failure to
meet scheduling orders and respond to discovery; (3) a
history of dilatoriness; (4) whether the conduct of the
party or the attorney was willful or in bad faith; (5) the
effectiveness of sanctions other than dismissal, which
entails an analysis of alternative sanctions; and (6) the
meritoriousness of the claim or defense.
(emphases omitted). See also Emerson v. Thiel Coll., 296
F.3d 184, 190-91 (3d Cir. 2002) (applying the Poulis
factors). Each factor need not be satisfied for the trial court
to dismiss a claim. Hicks v. Feeney, 850 F.2d 152, 156 (3d
Cir. 1988). They "should be weighed by the district courts
in order to assure that the ‘extreme’ sanction of dismissal
. . . is reserved for the instances in which it is justly
merited." Poulis, 747 F.2d at 870. And though the sanction
may be extreme, the appellate court’s standard of review is
deferential. In Poulis, for example, "[u]nder these
circumstances, although we might not have reached the
same result as did this district court judge, we cannot say
that the district court abused its discretion in ordering the
dismissal." Id.
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The District Court in this case explained its findings on
each of the six Poulis factors, and concluded that:
[t]he balance weighs in favor of precluding Plaintiff ’s
evidence on damages, thereby effectively dismissing
Plaintiff ’s breach of contract claim against Defendant.
The Court is mindful that the exclusion of evidence is
an "extreme" sanction. However, "[t]he court has
authority to employ the ‘most severe in the spectrum of
sanctions provided by statute’ to ensure compliance
with its discovery orders and to deter all parties in this
litigation from engaging in discovery misconduct." In
the instant case, Plaintiff ’s utter failure to provide
Defendant with a damages calculation until the eve of
trial is inexcusable, particularly in light of the repeated
requests by Defendant, Orders of this Court, and the
excessive length of time provided for discovery in this
case.
2002 WL 89604, at *7 (internal citations omitted). WCI
argues on appeal that each of the District Court’s findings
-- and thus its conclusion as well -- constituted an abuse
of discretion.
A. Extent of Plaintiff ’s Personal Responsibility
The District Court found that Rodale presented no
evidence and made no allegation that WCI -- as opposed to
WCI’s counsel -- was responsible for the failures to meet
discovery deadlines, and therefore this factor does not
weigh in favor of precluding the damages evidence. Rodale
counters that this finding is contradicted by the record, as
Reginald Ware, the alter ego of WCI and the only plaintiff ’s
witness to testify as to damages, refused on a number of
occasions to appear for a scheduled deposition.
Notwithstanding, we need not disturb the District Court’s
finding on this point. Again, no single Poulis factor is
dispositive, and even assuming that WCI does not bear
responsibility for its counsel’s conduct, consideration of the
remaining factors still compels affirming the District Court’s
decision to sanction WCI and dismiss the breach of
contract claim.
B. Prejudice to Defendant
The District Court found that Rodale had been "clearly
prejudiced by Plaintiff ’s counsel’s failure to provide specific
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information and documentation concerning the damages
calculation in a timely fashion." Id. The District Court noted
that while "prejudice" for the purpose of Poulis analysis
does not mean "irremediable harm," the burden imposed by
impeding a party’s ability to prepare effectively a full and
complete trial strategy is sufficiently prejudicial. This is a
correct statement of law. See Curtis T. Bedwell and Sons,
Inc. v. Int’l Fidelity Ins. Co., 843 F.2d 683, 693-94 (3d Cir.
1988) (rejecting appellant’s argument that "the district
court should not have dismissed its claim . . . unless the
harm to the other parties amounted to ‘irremediable
prejudice’ "). The District Court noted that WCI’s failure to
provide timely and specific information as to damages
caused prejudice to Rodale in the following forms: Rodale
had to file two motions (the motion to compel evidence and
the motion to preclude evidence at trial); and when WCI
finally made some effort to file its damages calculation, it
did so only one week before trial and without supporting
documentation, impeding Rodale’s ability to prepare a full
and complete defense.
WCI’s most vigorous arguments on appeal are directed to
the District Court’s findings on this point. None are
persuasive. First, WCI argues that Reginald Ware’s
deposition testimony on November 20, 2000 -- six weeks
before the January 8, 2001 deadline for the close of
discovery -- "practically gave [Rodale] a road map of [WCI’s]
claimed damages and how [Ware] arrived at them."
Appellant’s Br. at 14. The operative agreements between the
parties contain formulas for dividing compensation between
WCI and Rodale during the terms of the agreements, in the
event of a termination of the agreements for cause, and in
the event of a sale of the magazine. Each formula generally
provides for a 80%-20% split between Rodale and WCI, but
the calculations require factoring in a number of variables
involving net profits, cash received, book value, operating
deficits, etc. Reginald Ware’s deposition testimony arguably
gave some indication that claimed damages were derived
from the formulas in the agreement, but it did not provide
even a reasonably precise estimate of the amount WCI
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intended to seek at trial, or what evidence WCI would
introduce to establish its claim.3
WCI’s second argument is that fault for the delays is
more appropriately ascribed to Rodale, or at least to both
_________________________________________________________________
3. See, for example, the following exchange:
Q. What is the dollar amount of damages that you are seeking?
A. I think it’s going to start -- we haven’t finalized anything, but I
think I should start around 12 million.
Q. How did you arrive at that figure?
THE WITNESS: Should I go into this?
MR. PARRISH: If you want.
THE WITNESS: Okay. The magazine was sol d in a firesale for
four million. Okay. I should be entitled to
twenty percent of that which is $800,000. In
addition to that, when Rodale stole the
magazine -- well, when Rodale breached the
contract, we were receiving $40,000 a month.
If you factor in $40,000 a month for six years
of lost wages, that comes to about 5.3 -- 2, so
that’s six million there. And in addition to
that, when Rodale started the rumor which
was -- the false rumor about sexual
harassment, which was proven in court that it
did not occur, and that Ware Communications
did not breach the contract, the damage from
that alone should start at about four million,
which takes us to -- I don’t know seven --
around 11 or so. Then in addition to that, the
model of the twenty percent of net profits, had
Rodale not breached the contract, again, the
magazine was projected to make approximately
three and a half million dollars a year. And a
multiple of eight would take that to -- if you
take three times eight -- takes it to 24, and we
should be entitled to twenty percent of that,
which is another five million. So that’s where
I’m, at least, at 12.
App. at 68-70. See also infra Part III (concluding that the deficiencies in
WCI’s damages evidence were grounds for dismissing its breach of
contract claim).
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parties. According to WCI, that Rodale waited until January
2002 to inform the District Court it was unprepared to
defend against WCI’s claimed damages indicates an
absence of prejudice. This line of reasoning (or, more to the
point, rationalizing) overlooks entirely that Rodale’s motion
to preclude was prompted by the pretrial memorandum
WCI filed in January 2002 on the eve of trial. WCI asserts
that the parties were engaged in a " ‘paper war’ . . . with
both sides filing numerous and sundry motions, all of
which simply delayed trial and forced the Court to deal with
them." Appellant’s Br. at 16. This argument underwhelms.
As the District Court noted, we have construed prejudice to
include the burden that a party must bear when forced to
file motions in response to the strategic discovery tactics of
an adversary. 2002 WL 89604, at *3. Accord Curtis T.
Bedwell and Sons, 843 F.2d at 693-94. WCI’s eleventh-
hour filing of its damages calculation left Rodale with
approximately one week to evaluate and rebut the
information. In this context, it was hardly an abuse of
discretion for the District Court to conclude that"Plaintiff ’s
actions have clearly resulted in prejudice to Defendant."
2002 WL 89604, at *3.
C. History of Dilatoriness
D. Willful and Bad Faith Conduct
The District Court addressed the third and fourth Poulis
factors independently -- and found that both supported
sanctions -- but WCI addresses them as a single concept
on appeal. As to dilatoriness, the District Court noted that
after WCI’s counsel failed to respond to Rodale’s June 8,
2000 Request for Production of Documents and
Interrogatories, Rodale had to file a Motion to Compel a
month and a half after responses were due. WCI did not
respond to the discovery requests nor answer the motion to
compel. The District Court entered an Order on September
19, 2000, directing WCI to respond within fifteen days. As
noted, WCI once more failed to respond timely. The parties
agreed to a Stipulation, which included the threat of
exclusion of evidence should WCI provide incomplete
information, but WCI proceeded to answer that it had not
completed its determination of damages. Concluded the
District Court: "Therefore, by October of 2000, eight
9
months since the lawsuit commenced in this Court, and
five years after the breach of contract action was originally
brought before a court of this District, Plaintiff still had not
completed its determination of damages." Id. at *4. As to
willfulness and bad faith, the District Court pointed to
many of the same violations by WCI, and also noted that
"[n]o excuse has been proffered for the excessive
procrastination of Plaintiff ’s counsel." Id. at *5.
Nor is any excuse to be found in WCI’s brief on appeal.
Its argument may be reduced to the proposition that the
delays were the result of a "paper war" between two parties
equally at fault. Again, this overlooks that, as the plaintiff
in this matter, WCI bore the responsibility for providing a
damages calculation. It failed repeatedly to satisfy this
requirement in anything close to a timely and thorough
fashion. That the parties may have fought over ancillary
matters -- a point which Rodale contests and is not entirely
clear from the record -- does not support a conclusion by
us that the District Court abused its discretion in finding a
history of dilatoriness and bad faith by WCI.
E. Effectiveness of Alternative Sanctions
The District Court found that no other sanction besides
exclusion (and consequently dismissal) would remedy the
prejudice to Rodale, which had been deprived of a full
opportunity to examine WCI’s damages claim, as it was
revealed only one week before trial was scheduled and
without any supporting documentation. At this very late
stage of a protracted litigation, the District Court found
that it was neither appropriate nor economical to reopen
discovery to allow Rodale the necessary time to investigate
the damages claim. This was particularly so because WCI
agreed in the October 2000 Stipulation that further
noncompliance with discovery orders would be penalized by
exclusion.
WCI’s argument before us is twofold. First, it alleges that
the District Court more appropriately should have excluded
that portion of the damages calculation in the pretrial
memorandum that was "over and above" the calculations
provided in Reginald Ware’s deposition. In other words, the
District Court should have effected a "partial exclusion" of
10
only the new damages. There are at least a couple of
problems with this argument. As noted above, the
deposition testimony was (at best) tentative, imprecise, and
unsupported. In addition, to the extent that Reginald
Ware’s deposition statements may be deciphered, his
figures address the same variables as found in the sparse
calculations found in the pretrial memorandum -- i.e.,
advertising commissions, sale price of the magazine, and
forecasted net profits. In other words, the pretrial
memorandum does not proffer a "new" damages
calculation, or at least it does not do so in a form cleanly
separable from those referenced in the deposition
testimony. Partial exclusion would appear to be untenable.
WCI’s second argument is that the District Court
alternatively should have levied money sanctions on
plaintiff ’s counsel, as permitted by Rule 37. It is true that
Plaintiff ’s counsel still has not provided any explanation for
his conduct. But even if we opt for money sanctions rather
than exclusion of evidence, this does not support
concluding that the District Court abused its discretion in
ordering dismissal. See Poulis, 747 F.2d at 870.
F. Meritoriousness of Claim or Defense
The District Court found that because WCI’s contract
claim previously had withstood Rodale’s 12(b)(6) motion to
dismiss, it was meritorious. Neither party offers any reason
to disturb this conclusion.
* * * * *
The District Court concluded that the great weight of the
Poulis factors support sanctions in the form of exclusion
and dismissal. WCI’s arguments on appeal are
unpersuasive, and the continued absence of any
explanation for counsel’s tactics -- beyond simply"both
sides were in a paper war" -- bolsters our belief that the
District Court did not abuse its discretion in ruling to
exclude WCI’s damages evidence and dismiss its breach of
contract claim.
III. DISMISSAL OF BREACH OF CONTRACT CLAIM
ABSENT EXCLUDED EVIDENCE
WCI’s other principal argument on appeal is that the
District Court abused its discretion in dismissing the
11
contract claim because WCI still could prove damages
without documentation. It seems to be making the rather
novel assertion that certain damages still could be defined
and recovered without any supporting evidence. To
reiterate, the October 16, 2000 Stipulation stated that
"[s]hould the Plaintiff fail to provide such full and complete
responses, the parties agree that Plaintiff shall be
prohibited from presenting any evidence in support of its
claim at the time of trial of the within action." WCI argues
that because this language refers to "claim" in the singular,
the District Court should have allowed it to prove damages
not covered by the Stipulation. This assertion is
implausible. "Claim" plainly refers to the breach of contract
claim, not any one claim of damages among many (e.g., a
claim for lost profits from the sale price of the magazine, a
claim for lost monthly wages, etc.).
The District Court stated in a footnote that WCI’s
damages calculation "is insufficient to warrant a trial on
the merits." 2002 WL 89604, at *6 n.5. Pennsylvania law
requires that a plaintiff seeking to proceed with a breach of
contract action must establish "(1) the existence of a
contract, including its essential terms, (2) a breach of a
duty imposed by the contract[,] and (3) resultant damages."
CoreStates Bank, N.A. v. Cutillo, 723 A.2d 1053, 1058 (Pa.
Super. Ct. 1999). To prove damages, a plaintiff must give a
factfinder evidence from which damages may be calculated
to a "reasonable certainty." ATACS Corp. v. Trans World
Communications, Inc., 155 F.3d 659, 668 (3d Cir. 1998). "At
a minimum, reasonable certainty embraces a rough
calculation that is not ‘too speculative, vague or contingent’
upon some unknown factor." Id. at 669 (quoting Spang &
Co. v. United States Steel Corp., 545 A.2d 861, 866 (Pa.
1988)). The District Court concluded that
Plaintiff failed to provide any supporting
documentation or expert reports or analysis to support
its damages calculations. Plaintiff produced no
evidence or documentation concerning costs and
expenses Plaintiff avoided by not having to perform its
sales duties under the contract. Nor has Plaintiff
provided the basis for the itemized advertised
commissions. In fact, the damages calculations, as
12
presented, evince little more than the opinion of
Reginald Ware. "It is true . . . that the Pennsylvania
law of contracts allows for some uncertainty in
calculating damages . . . ." ATACS Corp., 155 F.3d at
670. However, "[w]hile mathematical certainty is not
required, the plaintiff must introduce sufficient facts
upon which the jury can determine the amount of
damages without conjecture." Delahanty v. First
Pennsylvania Bank, N.A., 464 A.2d 1243, 1257 (Pa.
1983); see also Scully v. U.S. WATS, Inc., 238 F.3d 497,
515 (3d Cir. 2001). After years of discovery, Plaintiff
. . . has failed to present evidence upon which the
factfinder could base a damages calculation to a
reasonable certainty.
2002 WL 89604, at *6 n.5.
WCI makes no argument that the District Court’s
statements of law are incorrect. Instead, WCI contends
that, without any supporting documentation, "the Appellant
could have testified in his case in chief that he received
monthly wages of Forty Thousand Dollars ($40,000.00) a
month." Appellant’s Br. at 27 (emphasis added). But WCI is
the Appellant here; Ware has been dismissed as a party to
this suit. And even if we were considering Ware’s, and not
WCI’s, alleged damages, Ware’s deposition testimony
reveals that his damages calculation was an incomplete
(and hardly precise) estimate, not evidence upon which a
factfinder could determine damages to a reasonable
certainty.4 The operative agreements contained a number of
formulas to determine the compensation to which each
party was entitled in the event the contract was terminated.
Calculating these formulas required information on several
factors relating to the financial health of the magazine. A
factfinder’s ability to award WCI damages resulting from a
breach of contract required far more specific evidence than
could be provided by the testimony of Reginald Ware as to
the damages that he personally suffered.
In sum, WCI has provided no reason to conclude that the
District Court abused its discretion in dismissing the
breach of contract claim, for WCI failed to present evidence
_________________________________________________________________
4. See supra note 3.
13
from which a factfinder could determine damages with
reasonable certainty.
IV. CONCLUSION
For the reasons stated, we conclude that the District
Court did not abuse its discretion in concluding that, after
many months of acrimony, delays, and warnings (one of
which was in a formal stipulation), WCI’s last-minute
submission of an incomplete and unsupported damages
calculation merited exclusion of the evidence and dismissal
of the breach of contract claim. In any event, WCI did not
introduce evidence upon which a factfinder could calculate
damages with reasonable certainty, thus supplying yet
another reason that the District Court did not abuse its
discretion in dismissing the breach of contract claim.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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