drummond sanctions reply r 190

{B1924933}

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

DRUMMOND COMPANY, INC.,

Plaintiff ,

vs.

TERRENCE P. COLLINGSWORTH, individually and as agent of Conrad & Scherer, LLP; and CONRAD & SCHERER, LLP,

Defendants .

)))))))))))))

Case No. 2:11-cv-3695-RDP-TMP

OPPOSED

Contains information designated as

“Confidential Information” under the

Protective Order.1

DRUMMOND COMPANY, INC.’S REPLY BRIEF IN SUPPORT OF ITS MOTION FOR

SANCTIONS AND REQUEST FOR AN EVIDENTIARY HEARING

William Anthony Davis, III (ASB-5657-D65W) Sara E. Kropf H. Thomas Wells, III (ASB-4318-H62W) LAW OFFICE OF SARA KROPF PLLC

Benjamin T. Presley (ASB-0136-I71P) 1001 G St. NW, Suite 800 STARNES DAVIS FLORIE LLP Washington, DC 20001 P.O. Box 59812 (202) 627-6900 Birmingham, AL 35259 (205) 868-6000 fax: (205) 868-6099

Attorneys for Drummond Company, Inc.

1

Accordingly, Drummond is publicly filing a redacted version of this reply brief to comply with the Stipulated Protective Order (Doc. 127).

Also, there are no new exhibits attached to this brief. All references to numerical exhibits are to those attached to the Declaration of H. Thomas Wells, III filed with Drummond’s Renewed Motion for Sanctions (Doc. 174-1).

FILED 2015 Mar-12 PM 05:09

U.S. DISTRICT COURT

N.D. OF ALABAMA

Case 2:11-cv-03695-RDP-TMP Document 190 Filed 03/12/15 of 26

i

TABLE OF CONTENTS

TABLE OF AUTHORITIES................................................................................................................... ii

I. DEFENDANTS REPEATEDLY VIOLATED THIS COURT’S OCTOBER 15, 2013 ORDER. ..........4

A. Drummond’s discovery requests called for the very documents that reflect the payments .................................5

B. Defendants’ representations are irreconcilable with their new contention that Drummond’s discovery requests did not seek witness payments. ........................................................................................................8

C. Defendants cannot argue in good faith that are not “payments to witnesses.”..................................9

II. THERE IS OVERWHELMING EVIDENCE OF BAD FAITH BY BOTH DEFENDANTS WHICH

WARRANTS SANCTIONS PURSUANT TO THIS COURT’S INHERENT POWER....................12

III. DEFENDANTS’ REMAINING ARGUMENTS ARE UNAVAILING. .......................................18

CERTIFICATE OF SERVICE ...............................................................................................................21


ii

TABLE OF AUTHORITIES

Cases Page(s)

Aztec Steel Co. v. Florida Steel Corp.,691 F.2d 480 (11th Cir. 1982) ...........................................................................................19

Chambers v. NASCO, Inc.,501 U.S. 32, 111 S. Ct. 2123, 115 L.Ed. 2d 27 (1991)..................................1, 2, 13, 16, 18

Flury v. Daimler Chrysler Corp.,427 F.3d 939 (11th Cir. 2005) ...........................................................................................19

Hazel-Atlas Glass Co. v. Hartford-Empire Co.,322 U.S. 238, 64 S.Ct. 997, 88 L.Ed 1250 (1944).............................................................18

In re Michael,326 U.S. 224, 66 S.Ct. 78, 90 L.Ed. 30 (1945)..................................................................16

In re Se. Banking Corp.,204 F.3d 1322 (11th Cir. 2000) ...........................................................................................1

In re Yorkshire, LLC,540 F.3d 328 (5th Cir. 2008) .........................................................................................2, 17

Jones v. Graham,709 F.2d 1457 (11th Cir. 1983) .........................................................................................13

Malautea v. Suzuki Motor Co., Ltd.,987 F.2d 1536 (11th Cir. 1993) ...............................................................................6, 19, 20

National Hockey League v. Metropolitan Hockey Club,427 U.S. 639, 96 S.Ct. 2778, 49 L.Ed. 2d 747 (1976).................................................19, 20

Nixon v. Adm’r of Gen. Servs.,433 U.S. 425, 97 S. Ct. 2777, 53 L.Ed. 2d 867 (1977)........................................................2

S. New England Tel. Co. v. Global NAPs Inc.,624 F.3d 123 (2d Cir. 2010)...............................................................................................20

United States v. One 32’ Scorpion Go-Fast Vessel,339 F. App’x 903 (11th Cir. 2009) ..............................................................................15, 17

Zocaras v. Castro,465 F.3d 479 (11th Cir. 2006) ...........................................................................................19


iii

Statutes and Rules Page(s)

18 U.S.C. § 401(1) .........................................................................................................................16

18 U.S.C. § 1621............................................................................................................................16

Fed. R. Civ. P. 37.................................................................................................4, 6, 12, 17, 19, 20


1

“He who tells a lie, is not sensible of how great a task he undertakes; for he must be forced to invent twenty more to maintain that one.” – Alexander Pope

* * *

Defendants were ordered by this Court in Balcero—before any testimony of any witness

had been taken—to disclose anything of value offered or given by Mr. Collingsworth, Conrad &

Scherer or their legal team to any witness on the Balcero plaintiffs’ Rule 26 disclosures. Ex. 21

(Balcero Doc. 332) at 6. Leading up to this Order, Mr. Collingsworth represented to this Court

that all such information had already been disclosed. Ex. 20 (Balcero Doc. 255) at 9. That was

false. At the time this representation was made, thousands of dollars in benefits had been offered

or paid

2

Drummond and this Court have spent considerable time, effort, and resources attempting

to uncover just how false Defendants’ initial representation in Balcero was. This Court made

clear, “But I know this: We are going to get to the bottom of it . . . .” Doc. 123 (Apr. 21, 2014

Hrg. Tr.) at 37:3-4. But throughout the course of this case, Defendants have attempted to

explain, excuse and defend their misrepresentations by creating many, many more. The lies have

snowballed to the point that it is impossible to discern which of their representations are true.

Even Defendants’ opposition brief, if its factual representations are assumed true, renders

even more of Defendants’ prior representations false. As just one example, Defendants now tell

the Court that Ivan Otero stopped representing paramilitaries in 2007, before ever meeting Mr.

Collingsworth

). Doc. 187 at 5;

2 Despite Defendants’ argument to the contrary, Doc. 187 at 18-19, it is proper for “a district court to consider violation of an order from a separate case where that wrongdoing is related to the case at hand.” In re Se. Banking Corp., 204 F.3d 1322, 1333 (11th Cir. 2000) (citing Chambers v. NASCO, Inc., 501 U.S. 32, 57 (1991)).


2

Doc. 187-2 (Otero Decl.) ¶¶ 21 & 22. If that is true, it means Defendants lied on June 21, 2013

in this case when they objected to producing communications with Otero on the basis that “Mr.

Otero represents former paramilitaries who are providing testimony against Drummond in this

case.” Doc. 43-12 (Defs’ Resp. to Drum. 2nd RFPs) at No. 8. It also means Mr. Collingsworth

lied in Balcero when he represented that Otero was counsel for El Tigre and Samario when they

signed their declarations for Mr. Collingsworth in 2009. Doc. 69-29 (Balcero Pls’ July 16, 2012

Resp. to Drum. 5th Irogs) at p. 11. The Court should see Defendants’ new arguments “for what

they [are]: before-or-after-the-fact attempts to cloak [their] bad faith conduct with legal

arguments.” In re Yorkshire, LLC, 540 F.3d 328, 332 (5th Cir. 2008).

The question squarely before the Court is this: How can this defamation case, which is

centered on what Defendants knew and when they knew it, continue to be litigated with any

confidence of a just result when neither Drummond nor this Court can trust that Defendants are

telling the truth? The fundamental problem is that this Court and Drummond – and Defendants’

own counsel – have no choice but to rely on Mr. Collingsworth to answer the most critical

questions in this case, and even Defendants admit that Mr. Collingsworth’s credibility is

destroyed. Doc. 187 at 20 (the revelation of his misrepresentations regarding witness payments

has “clearly hurt Mr. Collingsworth’s credibility before the Court”).3

“[T]he functioning of our adversary legal system . . . depends upon the availability of

relevant evidence in carrying out its commitments both to fair play and to the discovery of truth

within the bounds set by law.” Nixon v. Adm’r of Gen. Servs., 433 U.S. 425, 477 (1977).

Where, as here, a litigant’s misconduct so deeply corrupts a case that the adversarial process is

irreparably harmed, dispositive sanctions are warranted. Chambers, 501 U.S. at 50-51 (“[T]he

3 This reality alone renders completely untenable Defendants’ suggestion that this Court wait until the case is over to determine whether default sanctions are warranted.


3

bad-faith conduct by Chambers . . . was beyond the reach of the Rules; his entire course of

conduct throughout the lawsuit evidenced bad faith and an attempt to perpetrate a fraud on the

court, and the conduct sanctionable under the Rules was intertwined within conduct that only the

inherent power could address.”).

Amazingly, with the exception of Mr. Collingsworth’s statements on April 21, 2014,

Defendants are totally unapologetic for their misrepresentations

. In fact, they portray themselves as innocent

litigants who dutifully interpreted Drummond’s discovery requests to not call for documents

evidencing their payments. This fanciful self-portrayal cannot be squared with the facts.

Nor can it be reconciled with how they characterized Drummond prior to

. Before then, Defendants’ consistently

painted Drummond as an “outrageous” litigant that should be sanctioned for harassing the

Defendants with discovery requests for witness payment documents that Defendants had been

“open and clear” about disclosing in this case and in Balcero. Doc. 68 at 11. In fact, in their

opposition to Drummond’s original sanctions motion, filed on April 14, 2014, Defendants

represented that

Defendants’ tune

has changed dramatically now that they have been caught withholding and altering the very

documents they represented they were “open and clear” about disclosing,

.

According to the Defendants, Drummond is no longer an abusive litigant, harassing Defendants

with “duplicative” discovery requests. Rather, Defendants now paint Drummond as a litigant in

an immaterial “$500,000 lawsuit” whose discovery requests were so inadequate that Drummond


4

was never entitled to the “open and clear” disclosure of witness payments Defendants repeatedly

represented they had already made. Defendants can’t have it both ways.

Defendants have made innumerable misrepresentations to Drummond and this Court—in

pleadings, under oath, and in response to direct questions in open court—all in an effort to hide

(and then explain and “self-report” when discovered) their witness payments. Even Defendants’

most recent attempt at an explanation is irreconcilable with their prior representations. This

Court can and should enter a default judgment sanction against the Defendants.4

I. DEFENDANTS REPEATEDLY VIOLATED THIS COURT’S OCTOBER 15, 2013 ORDER.

Defendants argue that they should not be sanctioned under Rule 37 because they did not

disobey any court order. Doc. 187 at 8. To support this contention, Defendants claim that

“when the Court entered its October 15, 2013 Order on Drummond’s motion to compel, there

were no outstanding discovery requests for documents and information regarding

payments related to witness protection.” Id. at 11 (emphasis in original). That assertion is

demonstrably false. Furthermore, Defendants’ position suggests this Court’s Order was merely

4 Despite what Defendants’ opposition suggests, Drummond’s Renewed Motion for Sanctions is not about the ethics or legality of witness payments. That issue has been exhaustively briefed by the parties since July of 2013 and is currently pending before the Special Master. Defendants’ lies about their payments have nothing to do with whether the payments are somehow permissible (which they are not). Drummond’s motion is also not about whether it is permissible for a United States law enforcement officer to pay confidential informants who are Colombian narco-traffickers as an investigation technique in an international criminal investigation. Drummond’s motion is certainly not about whether Ivan Otero – a Colombian criminal lawyer who has a contingency fee interest in the civil cases in which his clients are testifying against Drummond – believes that . Nor is Drummond’s motion about the truth of the Defendants’ defamatory letters, which Defendants claim they have not yet had a chance to prove (despite conducting over a decade of intense discovery on that topic). Yet, after receiving two extensions of time and two page extensions, Defendants devote nearly a third of their brief to irrelevant discussions of these topics. Doc. 187 at 4-8; 25-30. Drummond does not respond herein to these points, as they are not germane to the issue before this Court. Drummond’s silence, however, should not be construed as any concession of or agreement with Defendants’ arguments.


5

hypothetical and advisory. It is ludicrous to suggest this Court entered an order requiring the

production of documents and information concerning witness payments when there were no such

discovery requests pending.

A. Drummond’s discovery requests called for the very documents that reflect

the payments

Prior to October 15, 2013, Drummond served 105 requests for production and 20

interrogatories. At the time these requests were drafted, Mr. Collingsworth and his firm had

already in Balcero (1) been ordered to disclose anything of value offered or given to any witness,

and (2) represented that they had done so. See page 1, supra. Drummond’s first two sets of

discovery requests were therefore broader than those issued in Balcero, and called for every

document which Defendants now contend they had no obligation to disclose. Included among

those discovery requests were the following requests for production:

43. From January 1, 2000 to the present, all communications, including, but not limited to, e-mails, letters, faxes, voicemails, between Defendants and Llanos Oil or any of its principals, representatives, agents or employees.

64. From January 1, 2000 to present, all documents, including, but not limited to, bills, invoices, cancelled checks, wire transfers, bank statements, expense reports, tax returns, loan documents, payroll records, receipts, and credit card statements, which evidence all expenses and costs that Defendants have incurred in pursuing litigation against Drummond . . . . 5

5 This request was specifically discussed in Drummond’s motion to compel as “relevant to discovering evidence of the source of witness payments.” Doc. 43 at 20. At the October 10, 2013 hearing, this Court recognized that Drummond’s case financing document requests could uncover evidence of witness payments and held that they had to be produced:

THE COURT: I would say that that’s got to be produced. I don’t think that’s

work product. In other words, if we have an operating fund for the firm, an

expense fund, and we’re pulling money from that in order to make security

payments, that’s what you’re concerned about.

MR. WELLS: That’s right.

THE COURT: Yeah, I think that’s discoverable. Okay?


6

8. All documents reflecting communications between Defendants or anyone working on their behalf and Ivan Otero.

Docs. 43-10 & 43-12.

.6

Another of Drummond’s requests essentially asked for all of Defendants’

communications with anyone regarding Drummond or their allegations against Drummond.

Doc. 43-10 (1st Req. for Prod. No. 71). On August 28, 2013, counsel for the parties held a

telephonic discovery conference with this Court regarding the pending motions to compel,

during which the Court directed the parties to meet and confer to further narrow the disputed

requests. This Court subsequently entered an order directing the parties to “file a joint report . . .

indicating their good-faith attempts to narrow the scope of the controversies between them.”

Doc. 55. On September 18, 2013, the parties jointly filed their report. Doc. 60. The joint report

narrowed Request 71, at least as it related to communications between Defendants and their legal

team, to “communications relating to the payment of witnesses, influencing of witnesses,

payments to witnesses’ families, payments to AUC members, payments to informants (both

Doc. 63 (Oct. 10, 2013 Hrg. Tr.) at 39:8-16 (emphasis added). Importantly, “[o]ral orders are just as binding on litigants as written orders; the consequences for violating an oral order are the same as those for violating a written order. Therefore, in determining the propriety of the Rule 37 sanction, we consider both the judge’s written and oral discovery orders.” Malautea v. Suzuki

Motor Co., 987 F.2d 1536, 1543 n.7 (11th Cir. 1993).

6


7

confidential and non-confidential) or payments to witnesses’ lawyers.” Id. at 3. On October 2,

2013, Defendants sent a letter offering to “log [] communications related to the payment of

witnesses,” and acknowledging this Court’s statement during the telephonic hearing that

“discovery related to ‘payment of witnesses was fair game.’” Doc. 62-4 at 3, 4.

Yet, Defendants now contend Drummond’s requests did not “even arguably” seek

information related to the payment of witnesses. Doc. 187 at 11. They also argue that it was not

until this Court’s October 2014 “sea-change” Order that they understood a payment to a witness

could include payment through a lawyer or to a family member. That simply makes no sense. A

proper response to Drummond’s request for communications regarding witness payments, as

ordered in October 2013, would have netted virtually every document Drummond has just

recently discovered and which prove Defendants have been repeatedly lying about their witness

payments.

All of the documents evidencing are

responsive to Drummond’s 1st and 2nd Requests for Production, reflect the fact of payments to

witnesses, and were the express subject of this Court’s October 15, 2013 Order. In violation of

that Order, these documents were withheld and not logged for over a year. Doc. 174 at 8-23.

What is worse, and directly relevant to the question of whether Defendants have acted in bad

faith, Defendants affirmatively represented these documents did not exist (or altered documents

that were produced) while simultaneously accusing Drummond of being an abusive litigant that

should be dealt terminating sanctions. Doc. 114 at 3, 16 (falsely representing that “Defendants

have completed their response to the document requests that were the subject of this Court’s


8

[October 15, 2013] Order” and asking for dismissal as a sanction against Drummond).

B. Defendants’ representations are irreconcilable with their new contention that

Drummond’s discovery requests did not seek witness payments.

Prior to the October 10, 2013 hearing, the Defendants repeatedly represented that

Drummond had already served discovery requests that called for documents reflecting witness

payments. According to Defendants’ new position, all of those representations were lies. On

August 16, 2013, in an effort to quash one of Drummond’s subpoenas and convince another

federal court to sanction Drummond, Mr. Collingsworth testified under oath that document

requests for payments to witnesses had

“either already been served on me in my capacity as counsel in the Balcero case or as a

Defendant in the underlying libel case,” and that all responsive documents had been produced.

Doc. 101-5 at ¶¶ 5 & 12. He testified similarly to two other federal courts. Doc. 101-3 ¶¶ 5 &

20; Doc. 101-4 ¶¶ 10 & 19.7

Drummond’s subpoena to IRAdvocates asked for everything concerning payments to

“individuals incarcerated in Colombia,

Doc. 118-3. The

subpoena sought requests by a witness or family member for payment (Nos. 1 and 2), actual

payments to the witness or a family member (Nos. 5 and 6), and documents relating to “any form

of assistance (whether monetary or nonmonetary in nature)” to the witness or a family member

(Nos. 7 and 8). Id. Defendants sought sanctions against Drummond for serving these requests,

7 Drummond specifically discussed these false declarations in its brief. Doc. 174 at 25. Defendants do not explain how those declarations could possibly be true or why those declarations, standing alone, do not destroy their argument that Drummond had no discovery requests outstanding as of October 15, 2013 which sought witness payments. Moreover, these miscellaneous proceedings have been transferred to this Court. Defendants have made no attempt to correct these false statements that are currently still being made to this Court.


9

representing both in pleadings and in sworn testimony that these requests had already been

served on them and that all responsive documents had either been produced or logged:

Cutting through Drummond Company, Inc.’s (“Drummond”) mudslinging and innuendo, the objective reality is Drummond fails to address the sole issue that should govern Movants’ motion – that Drummond’s subpoena to IRAdvocates duplicates the document requests served on Defendants, and in responding to those requests, Defendants have also searched for and produced documents that were in the files of IRAdvocates.

Drummond Company, Inc. v. Terrence P. Collingsworth, et al., 2:14-mc-00621-RDP, Doc. 14

(Defs’ Oct. 24, 2013 Supp. Br.) at 1; see also Doc. 101-5 (Collingsworth Decl.) ¶ 23 (“As

Drummond’s document requests to IRAdvocates are virtually identical to requests already made

to the Balcero Plaintiffs and/or to me in the libel case, I can say that any non-privileged

documents that are responsive to the requests to IRAdvocates have already been produced.”).

Therefore, Defendants cannot possibly represent to this Court that “it was not until

February 11, 2014 that Drummond first served discovery requests seeking documents and

information” concerning witness payments. Doc. 187 at 12. In fact, Defendants objected to

those February 11, 2014 requests “as being duplicative and repetitive to previous discovery

requests” and represented that “non-privileged documents have previously been produced that

are responsive to this request.” Doc. 101-2 at p. 31 (emphasis added).8

C. Defendants cannot argue in good faith that

are not “payments to witnesses.”

Defendants also attempt to justify their concealment

by arguing these payments were not “direct payments by either Conrad &

8 Interrogatory No. 1 of Drummond’s Third Set of Interrogatories similarly asked Defendants to “[i]dentify every instance in which the Defendants (or any member of their litigation team) have made payments to witnesses in the litigation against Drummond, or payments to any Colombian paramilitary or lawyer representing any Colombian paramilitary.” Doc. 101-2 at p. 10. Defendants also objected to this interrogatory “as . . . duplicative and repetitive to previous discovery requests.” Id.


10

Scherer or Mr. Collingsworth to a witness or witness’s family,” Doc. 187 at 14, and therefore

“defendants had a good faith basis for objecting on this ground and construing ‘payments to

witnesses’ narrowly as only those payments flowing directly from Conrad & Scherer to a witness

or a witness’s family.” Id. at 19. According to Defendants, they were not required to disclose

these payments until after this Court’s “sea-change” October 15, 2014 Order gave the “operative

definition” of “payments to witnesses.” Id. at 4, 14. That argument has no merit whatsoever.

For

Defendants to claim that these are “indirect” payments that did not qualify as “payments to

witnesses” within the meaning of the October 15, 2013 Order is utterly frivolous. Defendants

cannot excuse their misconduct by adopting an absurd interpretation of this Court’s Order.

Malateau, 987 F.2d at 1543.

Defendants produced documents showing payments to

Charris on October 3, 2013 in response to Drummond’s 1st and 2nd Requests for Production.

Those payments were made by Conrad & Scherer employees in Florida who withdrew cash from

Conrad & Scherer’s bank account and sent it via Western Union and MoneyGram to Yineth

Baeza in Colombia, who then deposited cash into Charris’ wife’s bank account. Doc. 44-6;

Drummond Company, Inc. v. Terrence P. Collingsworth, et. al., 2:14-mc-01346-RDP, Doc. 12-

9


11

35. Baeza is an “assistant” for Francisco Ramirez Cuellar, who Mr. Collingsworth testified is

“my local counsel” in “the Drummond human rights cases.” Doc. 44-8; Doc. 69 (Nov. 7, 2013

Collingsworth Decl.) ¶ 23.

.10

Defendants not only misrepresented the existence of critical documents, they

intentionally altered

10 Defendants’ attribute their failure to log these payment documents in response to this Court’s October 15, 2013 Order to the inadequacy of their document searches prior to October of 2014. Doc. 187 at n.10. That is hardly the credible explanation required to avoid sanctions. It is also irreconcilable with what they represented to this Court on April 14, 2014: “there is absolutely no issue of the propriety of Defendants’ searches or the completeness of their production.” Doc. 114 at 1. Moreover, it is belied by their argument that they made a conscious decision not to disclose their payments to because they were not responsive topending discovery requests. For that to be true, Defendants had to be aware that documents reflecting those payments existed, and should have logged them. Instead, they produced multiple “supplemental” privilege logs that omitted documents reflecting these witness payments. Exs. 11, 23, 24.


12

Doc. 174 at 13-17. Defendants apparently think nothing of this egregious misconduct, as they

curtly state “[i]n May 2014, defendants produced documents in which they redacted evidence of

security payments made by Conrad & Scherer to Ivan Otero. These documents did not in any

way mention or refer to witnesses or witness security payments.” Doc. 187 at 14. In other

words, Defendants contend

does not have to be

produced because the document itself does not say “payment to a witness.” This exemplifies the

need for default sanctions. This case cannot be litigated where documents which Defendants

know evidence witness payments are withheld (unapologetically) simply because that fact is not

apparent from the face of the document.

Defendants cannot credibly argue they did not violate this Court’s October 15, 2013

Order. Defendants violated that Order repeatedly, while simultaneously and falsely representing

that responsive documents did not exist. Doc. 174 at 8-23; see also Doc. 80 at 12 (“The three

Balcero witnesses who received security assistance from Defendants, Libardo Duarte, Jose

Gelvez Albarracin, and Jairo Jesus Charris Castro, all first provided a written statement to

counsel for Plaintiffs or the Colombian authorities.”). Defendants even altered documents they

did produce in order to hide the payments. Exs. 9, 10, 17 & 18. Default judgment sanctions

pursuant to Rule 37 are reserved for circumstances like these.

II. THERE IS OVERWHELMING EVIDENCE OF BAD FAITH BY BOTH DEFENDANTS WHICH

WARRANTS SANCTIONS PURSUANT TO THIS COURT’S INHERENT POWER.

Defendants and Drummond do agree on one point – the imposition of sanctions pursuant

to a court’s inherent power requires a showing of bad faith. Defendants, however, claim “there


13

is no evidence that Conrad & Scherer acted in bad faith.” Doc. 187 at 30.11 As to

Collingsworth, they contend “there is not sufficient evidence that Mr. Collingsworth made [his]

statements [at the April 21, 2014 hearing] in bad faith.” Id. at 20. To the contrary, Defendants’

bad faith is exhibited by a continuous course of misrepresentations dating back years, both in this

case and in Balcero.

Defendants miss the point in arguing they cannot be sanctioned in this case for their

misrepresentations in Balcero. Doc. 187 at 18-19. Drummond is not asking this Court, in this

case, to sanction the Defendants for their violation of this Court’s orders in Balcero. But

Defendants’ misrepresentations in Balcero are a crucial part of understanding why their conduct

in this case constitutes bad faith. Defendants acknowledge that “[t]here was an order in Balcero

that related to witnesses,” Doc. 187 at 19, and they offer no substantive response to Drummond’s

point that this Order required the disclosure of their payments .

Doc. 174 at 20-21. Defendants do not dispute they violated that Order, and Defendants’

concealment and misrepresentations in Balcero are evidence of a persistent course of fraudulent

conduct which warrants severe sanctions pursuant to this Court’s inherent power. Chambers,

501 U.S. at 51-52; see also Jones v. Graham, 709 F.2d 1457, 1462 (11th Cir. 1983) (“long

pattern of conduct” warranted dismissal sanction).

This Court’s order in Balcero is also critical because Defendants have repeatedly

referenced their discovery responses in Balcero and made them an integral part of their

misrepresentations in this case. For example, on July 18, 2013, Defendants represented to this

11 Conrad & Scherer and Collingsworth are equally responsible for all of the misrepresentations discussed in Drummond’s Renewed Sanctions Motion, which are in pleadings filed on behalf of both Defendants. See Doc. 174 at 6-23. Conrad & Scherer also cannot sidestep responsibility for the concealment of the payments by claiming a lack of knowledge of the payments. See id. at 7, 23 & n.12.


14

Court that they had produced all responsive documents relating to witness payments because “all

of the ‘evidence’ Drummond has was produced by the Plaintiffs in the Balcero case, and

Plaintiffs produced every responsive document they had.” Doc. 46 at 3 (underlined emphasis

added). Exactly one year later, and after countless similar misrepresentations in between,

Defendants were still incorporating their Balcero discovery responses into false representations

that all witness payments had been disclosed:

Ex. 13 (Defs’ Crime-Fraud Reply Br.)

at 2 (emphasis in original).12

Defendants admit that Mr. Collingsworth’s false statements at the April 2014 hearing

constitute evidence of bad faith. Doc. 187 at 20. Defendants claim, however, that “[a]t most,

Mr. Collingsworth has damaged his credibility before the Court.” Id. at 21. Mr. Collingsworth

admits “[t]here is simply no[]” explanation for his conduct, but then offers the explanation that

he was “

.” Doc. 187-21 (Mar. 5, 2015 Collingsworth Decl.) at ¶¶ 3 & 13. This excuse

is simply not credible. This Court will no doubt recall that it made clear Mr. Collingsworth was

not expected to answer any questions himself. Doc. 123 (Apr. 21, 2014 Hrg. Tr.) at 30:17-18

12 Defendants also used this misrepresentation to obstruct Drummond’s third party discovery efforts. See, e.g., Doc. 101-3 (Aug. 19, 2013 Collingsworth Decl.) ¶ 5 (document requests seeking payments to witnesses “have either already been served on me in my capacity as counsel in the Balcero case or as a defendant in the underlying libel case. Moreover, in my capacity as Defendant in the libel action and as counsel in the Balcero litigation, I provided all responsive, non-privileged documents”) (underlined emphasis added).


15

(“JUDGE PROCTOR: Sure. I’m trying not to put him on trial. I’m going through counsel.”).

Nevertheless, Mr. Collingsworth volunteered to respond, righteously stating, “Your Honor, the

shortest way to the truth is to ask me the question. Thank you.” Id. at 30:20-21.

Moreover, one week prior to that hearing, Defendants falsely represented that they had

“completed their document search and supplemental log in full compliance with the Court’s

discovery Order.” Doc. 114 at 2. Mr. Collingsworth also testified that he was personally

involved in the document review, he “receive[d] the last batch of responsive documents [on]

April 11, 2014,” and that those documents were ready for production. Doc. 114-2 (Apr. 14, 2014

Collingsworth Decl.) ¶ 4. If that testimony was true, Mr. Collingsworth reviewed documents

reflecting less than two

weeks prior to the April 21, 2014 hearing.

Mr. Collingsworth stood up before this Court and represented that

there were “exactly three” Balcero witnesses who received payments.

For Mr. Collingsworth to now claim that he

is not a credible explanation, nor one this Court should accept. United States v. One 32’

Scorpion Go-Fast Vessel, 339 F. App’x 903, 905-06 (11th Cir. 2009). Mr. Collingsworth’s

explanation is further belied by the Defendants’ actions after the April 21, 2014 hearing. In the

nine months between the April 2014 hearing and Drummond’s filing of the instant motion for

sanctions, Defendants did nothing to correct Mr. Collingsworth’s misrepresentation to this

Court. Mr. Collingsworth’s flippant statement in his declaration that he was “swamped with

work in other cases” in the months following the hearing is absolutely no excuse. Doc. 187-21 at

¶ 15. In fact, during those months Defendants


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3

While perhaps the most egregious, Mr. Collingsworth’s false responses to this Court’s

direct questions are nowhere near the only evidence of bad faith. To the contrary, Drummond set

forth a timeline of repeated misrepresentations made with the purpose of fraudulently concealing

witness payments, Doc. 174 at 8-23, which included specific examples that satisfy each of the

“extreme situations” Defendants admit warrant sanctions pursuant to a court’s inherent power:

! “When ‘fraud has been practiced upon the court,’ or the very temple of justice has been defiled.’” Doc. 187 at 17.

o Mr. Collingsworth stood up in front of this Court and, after prefacing his answer with “the shortest way to the truth is to ask me,” lied. Doc. 174 at 3-4. That is a fraud upon the court. Moreover, the Defendants’ repeated misrepresentations that they had produced all witness payments – that ceased only after a third party produced documents for in camera inspection – constitutes a continuous course of conduct that amounts to a fraud on the court. See Chambers, 501 U.S. at 49-51.

! “Where an attorney knowingly and recklessly raises a frivolous argument . . . .” Doc. 187 at 17.

o Defendants repeatedly submitted knowingly false testimony in support of their frivolous argument that Drummond’s third party subpoenas should be quashed (and Drummond sanctioned for serving them), because Defendants had already disclosed all of their witness payments. Doc. 174 at 25. Defendants raised this same false argument – that they had produced all witness payments – in numerous other filings with this Court in an effort to hide the truth and disrupt this litigation by opposing Drummond’s motion to compel, avoiding sanctions, arguing against the crime-fraud exception, and in support of their motion to clawback “privileged” documents “mistakenly” produced by Parker Waichman. Docs. 46, 68, 80, 91, 114, Ex. 12, & Ex. 13.

! “By delaying or disrupting the litigation or hampering enforcement of a court order.” Doc. 187 at 17.

13 Defendants argue Mr. Collingsworth should not be held in contempt of court because his statements to this Court on April 21, 2014 “[did not] constitute perjury.” Doc. 187 at n.12. The key factor of § 401, as it applies to Mr. Collingsworth’s misrepresentations in open court, was whether his statements obstructed the administration of justice—not whether the statement meets all the elements of § 1621, the general perjury statute. A statement need not be made under oath in order to constitute contempt of court. In re Michael, 326 U.S. 224, 228 (1945).


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o Defendants’ have displayed a continuous course of conduct (fraudulently concealing witness payments) that spans years. Doc. 174 at 8-23. As Defendants acknowledge, their conduct has caused substantial delay and forced Drummond to incur tremendous cost in this proceeding (and other miscellaneous proceedings associated with this action) just to obtain discovery of the “fact of payments to witnesses,” something this Court ordered produced in October of 2013. See Doc. 114 at 3; Doc. 174 at 8-23.

! “When a ‘party commits perjury or . . . doctors evidence that relates to the pivotal or lynchpin’ issue in the case.” Doc. 187 at 17.

o Mr. Collingsworth perjured himself three times in August of 2013 alone. Doc. 174 at 25. He continued to misrepresent the facts in subsequent declarations signed under penalties of perjury in the months that followed in which he represented that only three witnesses (Charris, Duarte, and Gelvez) were paid. Id.

at 10-13. He stood up in this Court on April 21, 2014, and repeated this lie. Id. at 3-4. Defendants altered evidence

Id. at 13-17.

When deciding whether to impose sanctions on Defendants under either Rule 37 or its

inherent authority, this Court sits as the trier of fact and decides whether Defendants’

explanations are credible.14See One 32’ Scorpion Go-Fast Vessel, 339 F. App’x at 905; In re

Yorkshire, LLC, 540 F.3d at 332 (affirming court’s authority to make credibility determinations

when imposing sanctions pursuant to its inherent power and rejecting “before-or-after-the-fact

attempts to cloak . . . bad faith conduct with legal arguments”).

Drummond cited abundant evidence of the Defendants’ repeated and willful

misrepresentations to this Court. In response, Defendants baldly deny all but one specific

instance, and then offer an explanation that cannot be reconciled with the facts as to why Mr.

Collingsworth did not act in bad faith on April 21, 2014. Defendants have not carried their

14 Defendants have offered absolutely no explanation for some of their misconduct. For example, Mr. Collingsworth admits that there is no explanation for his statements to this Court on April 21, 2014. Doc. 187-21 (Mar. 5, 2015 Collingsworth Decl.) ¶ 3. Nor did Defendants offer any explanation regarding the declarations Mr. Collingsworth submitted in August of 2013, in which he testified that documents reflecting payments if any existed, had already been produced or logged. Doc. 174 at 25. Nor do they explain their false arguments made to three federal courts based on these declarations.


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burden of providing this Court with credible explanations for their actions, offering instead legal

arguments which are irreconcilable with their prior representations and the undisputed facts.

Sanctions pursuant to this Court’s inherent power are warranted and necessary.

III. DEFENDANTS’ REMAINING ARGUMENTS ARE UNAVAILING.

Defendants make the astounding assertions that “there has been no procedural harm to

Drummond” and “Drummond has suffered no prejudice.” Doc. 187 at 3 & 22. Defendants have

forced Drummond to expend substantial resources in this Court litigating a motion to compel,

motions to quash, a motion for sanctions, and briefing before the Special Master on various

issues, all in order to uncover witness payments this Court ordered produced in October of 2013.

Defendants moved to quash nearly every subpoena Drummond served, seeking sanctions against

Drummond for issuing them. As the Defendants have eagerly pointed out, this effort has caused

Drummond to incur tremendous costs. Doc. 114 at 3 (chastising Drummond for “spending

millions of dollars on lawyers and filing subpoenas all over the country” for witness payment

documents Defendants claimed they had already disclosed).

But it is not just harm to Drummond that demands severe sanctions here; Defendants’

misconduct has damaged the integrity of the judicial process before this Court. Conduct that

undermines the integrity of the courts “‘involves far more than an injury to a single litigant. It is

a wrong against the institutions set up to protect and safeguard the public.’” Chambers, 501 U.S.

at 44 (quoting Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 246 (1944)). The

damage to the judicial process would indeed be severe were a future litigant to read this record

and come away with the impression that they could engage in the same conduct Defendants have

without suffering severe penalties. For this reason, courts have the unquestioned authority to

impose sanctions even where a litigant suffers no prejudice:


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Rule 37 sanctions are imposed not only to prevent unfair prejudice to the litigants but also to insure the integrity of the discovery process. Aztec’s contumacious conduct justified the district court’s dismissal of the entire action. If we were to hold otherwise, ‘other parties to other lawsuits would feel freer than we think Rule 37 contemplates they should feel to flout other discovery orders of other District Courts.’

Aztec Steel Co. v. Florida Steel Corp., 691 F.2d 480, 482 (11th Cir. 1982) (citing Nat’l. Hockey

League v. Metropolitan Hockey Club, 427 U.S. 639, 643 (1976)). Sanctions not only provide

redress for the harm suffered by Drummond, but also “deter future parties from trampling upon

the integrity of the court.” Zocaras v. Castro, 465 F.3d 479, 484 (11th Cir. 2006). 15

A default judgment is clearly a severe sanction. It is equally clear that this Court has the

authority to enter such a sanction if the offending party has acted willfully or in bad faith and a

lesser sanction will not suffice. Malautea, 987 F.2d at 1544 (“a default sanction may be proper

even when not preceded by the imposition of lesser sanctions. When lesser sanctions would be

ineffective, Rule 37 does not require the vain gesture of first imposing those ineffective lesser

sanctions.”); Flury v. Daimler Chrysler Corp., 427 F.3d 939, 944 (11th Cir. 2005). Here, there is

an overwhelming evidentiary record of Defendants’ willful and bad faith conduct in the face of

repeated warnings by this Court of the seriousness of the situation. See Doc. 63 (Oct. 10, 2013

Hrg. Tr.) at 45:23-46:12, 84:4-85:16; Doc. 105 (Apr. 3, 2014 Text Order); Doc. 123 (Apr. 21,

2014 Hrg. Tr.) at 19:6-16, 37:3-4.

Nevertheless, Defendants ask that this Court not enter a default judgment against them

because their “incredible efforts . . . to comply with the Court’s October 15, 2014 [Order] . . .

demonstrates that sanctions are wholly unnecessary to ensure defendants fully comply with all of

15 Contrary to Defendants’ argument, see Doc. 187 at 1, the purported merits of their defense – which, frankly, are dubious at this point – should not dissuade this Court from severely sanctioning the Defendants. Malautea, 987 F.2d at 1544 (“the probable merit of a litigant’s case does not preclude the imposition of a default judgment sanction against that litigant”).


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their discovery obligations.” Doc. 187 at 9.16 But it was Defendants’ year-long noncompliance

with the Court’s October 15, 2013 Order (Doc. 64) that led to the entry of the October 15, 2014

Order. Doc. 151 at 1. Moreover, Defendants’ misrepresentations regarding the newly

discovered witness payments have nothing to do with any privilege log (the subject of the

October 15, 2014 Order), as the fact of witness payments is not privileged. Second, Defendants’

actions after they were threatened with sanctions are no excuse for their prior misconduct:

[I]f parties are allowed to flout their obligations, choosing to wait to make a response until a trial court has lost patience with them, the effect will be to embroil trial judges in day-to-day supervision of discovery, a result directly contrary to the overall scheme of the federal discovery rules. Moreover, . . . compulsion of performance in the particular case at hand is not the sole function of Rule 37 sanctions. Under the deterrence principle of [National Hockey

League], plaintiff’s hopelessly belated compliance should not be accorded great weight. Any other conclusion would encourage dilatory tactics, and compliance with discovery orders would come only when the backs of counsel and the litigants were against the wall.

S. New England Tel. Co. v. Global NAPs Inc., 624 F.3d 123, 148-49 (2d Cir. 2010). This is

particularly true where, as here, Defendants only disclosed their payment scheme after a

subpoena to a third party resulted in a document being produced to the Special Master which

would have revealed the scheme. See Malautea, 987 F.2d at 1541.

Defendants’ bad faith misconduct has rendered this case impossible to litigate. It is no

longer possible to expect to obtain credible, truthful answers to the most critical questions in this

case. The adversarial system cannot function under these circumstances. Defendants’

misconduct has so deeply corrupted this case that it has become a fraud on the court, making a

default judgment not only proper, but the only viable outcome.

16 Defendants’ comment that they “replaced their small insurance defense counsel with a strong litigation team” Doc. 187 at 4, does not give them license to whitewash their misconduct in this case. Again, Drummond is seeking sanctions against the Defendants, not their counsel. Defendants tell this Court they are a “highly reputable law firm.” Id. They should therefore need no help understanding and complying with their duties to the judicial process.


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Respectfully submitted,

/s/ H. Thomas Wells, III /s/ Sara E. Kropf William Anthony Davis, III (ASB-5657-D65W) Sara E. Kropf H. Thomas Wells, III (ASB-4318-H62W) LAW OFFICE OF SARA KROPF PLLC

Benjamin T. Presley (ASB-0136-I71P) 1001 G St. NW, Suite 800 STARNES DAVIS FLORIE LLP Washington, DC 20001 P.O. Box 59812 (202) 627-6900 Birmingham, AL 35259 (205) 868-6000 fax: (205) 868-6099

Attorneys for Drummond Company, Inc.

CERTIFICATE OF SERVICE

I hereby certify that on March 12, 2015, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following:

Bradley J. Smith, Esq. Eric D. Bonner, Esq. Clark, Hair & Smith, P.C. 1000 Urban Center Drive Suite 125 Birmingham, Alabama 35242

Christopher S. Niewoehner Kendall Enyard Savannah E. Marion STEPTOE & JOHNSON, LLP 115 S. LaSalle Street Suite 3100 Chicago, IL 60603 Tel: (312) 577-1240

Special Master T. Michael Brown, Esq. Ms. Carly Miller, Esq. Bradley Arant Boult Cummings, LLP One Federal Place 1819 Fifth Avenue North Birmingham, Alabama 35203 [email protected] [email protected]


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Kenneth McNeil SUSMAN GODFREY 1000 Louisiana, Suite 5100 Houston, Texas 77002-5096 [email protected]

Robert Spotswood William K. Paulk SPOTSWOOD SANSOM & SANSBURY, LLC One Federal Place 1819 Fifth Avenue North, Suite 1050 Birmingham, Alabama 35203 [email protected] [email protected]

/s/ H. Thomas Wells, III

H. Thomas Wells, III (ASB-4318-H62W)


drummond sanctions reply r 190

Documents

defendants representations

rdptmp document

drummonds discovery

presley asb

district courtn

sanctions pursuant

s reply brief

drummonds renewed motion