COFC Dismissed a Suit Because the Contractor Didn’t Respond to Discovery. Why Did the Federal Circuit Think Dismissal Was Unwarranted?

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The contractor filed suit seeking termination costs. The contractor received several extensions in which to respond to the government’s discovery requests. After the contractor missed a court-ordered discovery deadline, the COFC dismissed the case with prejudice. But the Federal Circuit reversed. Dismissal of a case as a discovery sanction is only authorized when the failure to comply with a court order is due to willfulness or bad faith, not from inability to comply with the order. Here, the COFC made no finding of willfulness or bad faith.

Intelligent Investments, Inc. v. United States, Fed. Cir. 2021-2310

Background

Intelligent Investments had a contract with the Army Corps of Engineers to remove tornado debris. In 2011, the Corps terminated the contract for convenience. In 2016, Intelligent’s CEO was indicted for allegedly making false statements related to the contract, but he was ultimately acquitted.

While the criminal case was pending, Intelligent filed suit in the Court of Federal Claims seeking termination for convenience costs. In 2020, the government served discovery requests on Intelligent related to the termination claim. Over the next year, Intelligent and the government litigated the discovery requests, and Intelligent received three extensions of time in which to produce responsive documents. Finally, the COFC ordered Intelligent to produce responsive documents to the government by May 15, 2021.

But a few days after the May 15 deadline passed, Intelligent notified the government that its CEO was in the hospital suffering from PTSD and depression. In light of the CEO’s medical issues, Intelligent asked for another extension to respond to the discovery.

The court, however, denied the request for a stay and then sua sponte dismissed the suit with prejudice as a sanction for failing to comply with the court’s discovery orders. Intelligent appealed to the Federal Circuit.

Holding

The Federal Circuit reversed. Dismissal of a case as a discovery sanction is a harsh remedy. Such a dismissal is only authorized when the failure to comply with a court order is due to willfulness or bad faith, not from inability to comply with the order. Here, the COFC made no finding of willfulness or bad faith. Without specific findings of bad faith, the sanction of dismissal could not stand.

Intelligent Investments is represented by William J. Fleischaker of Fleishaker & Williams. The government is represented by Robert C. Bigler, Brian M. Boynton, Elizabeth Marie Hosford, and Patricia M. McCarthy of the Department of Justice.

–Case summary by Craig LaChance, Senior Editor

Fed Circuit - Intelligent Investments