Ford sanctioned nearly half a million dollars for material misrepresentations
Johnson v. Ford Motor Co., No. 3:13-cv-06529 (S.D.W. Va. Dec. 27, 2017 and Mar. 22, 2018).
In two separate opinions, the court held that the defendant made material misrepresentations during the course of discovery and determined that it should pay nearly half a million dollars in sanctions.
This putative class action alleged that the defendant, Ford Motor Co., manufactured defective vehicles that were prone to sudden unintended accelerations. During discovery, the plaintiffs sought access to the source code for Ford’s throttle control system.
Ford “attempted to encumber and restrict” that access, claiming that the company “vigilantly safeguarded” its source code. Protesting perhaps too strongly, Ford stated that the source code “has never been produced, ever, never, ever been produced in the format that the plaintiffs are requesting to anyone” outside of the company.
The magistrate accepted Ford’s position. Ultimately, she restricted the plaintiffs to read-only access within a secure room at a Ford facility in Michigan, under the supervision of Ford employees.
As the plaintiffs’ expert analyzed Ford’s source code, he found email attachments indicating that Ford had previously distributed that code. Faced with those emails, Ford admitted that it had disseminated the source code to third parties.
The plaintiffs moved for sanctions under either the Federal Rules of Civil Procedure or the court’s inherent authority. They claimed that Ford “obstructed the discovery process,” causing a “colossal waste of time and money,” and failed to comply with the court’s production orders. The “draconian measures” the plaintiffs took to comply with Ford’s demands were “largely unnecessary,” as Ford had sent the source code to distributors and even other car companies like Mazda.
The court concluded that “Ford engaged in a campaign of misrepresentations” that caused the plaintiffs “to incur unnecessary costs.” However, it did not find that Ford failed to produce any information that the court had ordered it to produce.
Applying its inherent authority to penalize misconduct not encompassed by the Federal Rules, the court sanctioned Ford to pay attorneys’ fees, expert fees, and costs that the plaintiffs incurred due to Ford’s misrepresentations.
In a follow-up opinion, the magistrate determined the lodestar figure for the sanction after adjusting both the hourly rates and number of attorney hours the plaintiffs requested. In total, the plaintiffs asked for nearly $700,000. That amount included attorneys’ fees for “preparing, negotiating, and arguing the source code protective order” and the motion for sanctions. It also included the costs of having attorneys and experts travel unnecessarily to Michigan.
Ford, slashing the attorneys’ hourly rates and number of hours claimed, argued that just under $225,000 would be appropriate.
The plaintiffs listed 14 attorneys with rates ranging from $175 to $950 an hour, along with four paralegals at $115 to $275 per hour. Finding that the case was “not so complex that no local lawyer [could] effectively prosecute it,” the magistrate reduced these charges to reflect prevailing local rates.
The magistrate then reviewed the number of hours the plaintiffs’ attorneys claimed. The plaintiffs had already reduced their attorneys’ time by 50 percent, since they only succeeded on half of their sanctions motion. The magistrate further excluded those hours that she felt were “duplicative, overlapping, or excessive” for the case.
However, in doing so, the magistrate observed that the “time billed by [plaintiffs’] counsel would not have been necessary at all if Ford had been accurate and forthright at the outset” of discovery. Indeed, the “entire process … would have been shortened and streamlined if Ford had not repeatedly and vigorously misrepresented” the security of its source code.
After adding in travel time and expenses for the plaintiffs’ attorneys and experts, the magistrate ordered Ford to pay $488,028.31 within 30 days.
Takeaways on Controlling Ediscovery Costs
The coda to this case says it all. Ford won summary judgment just four days after the magistrate’s order, making its misconduct, and these sanctions, entirely unnecessary. One of the simplest ways to control discovery costs, and indeed overall litigation costs, is to pay only your own costs, not your opponent’s. Ford’s wounds here were entirely self-inflicted.