Bradley v. American Household, Incorporated

Facts

D manufactured over 32 million electric bedding products between 1990 and 2000. D receives approximately 600,000 returned products each year, including those that have allegedly smoked, sparked, smoldered, or caught fire. In 1999, for instance, D received about 1100 such blanket remnants; in 2000, about 1800. D retains returned products for as long as they are the subject of a potential claim or lawsuit. Once a customer's complaint has been resolved, the product is marked for destruction or returned to the consumer upon request. Documentary claim files are not discarded with the product but instead are retained for an additional two years after the claim is closed. George McLaughlin, P's lead counsel in this case, requested the suspension of D's policy on numerous occasions, dating back at least to 1998. The purpose of these requests was to determine if the returned blankets had any bearing on pending cases against D. D did not intend to change its policy. A fire occurred at Ps' home and they retained McLaughlin. Ps sued D claiming the fire was caused by a defective electric blanket. During discovery, Ps sought the remains of, and the claims files for, every returned electric blanket that had allegedly smoked, sparked, smoldered, or caught fire. The magistrate judge ordered D to produce blanket remains 'in their possession as of the date of the serving' of P's initial discovery request, which was November 2, 1999. He also ruled that D had to produce 'claims filed that D has in its possession.' D set aside all of the blankets then in its possession - on August 8, 2000 - that had also been in its possession nine months earlier on November 2, 1999. Ps had not specifically requested that D suspend its retention policy, and the magistrate judge had not ordered a suspension of the policy on his own initiative. D continued to dispose of blankets that had been returned after November 2, 1999, just as it had disposed of blankets returned prior to the magistrate judge's August 8 Order. On November 1, 2000, the Court adopted the magistrate judge's August 8 Order. Ps moved for sanctions. At a hearing on November 17, 2000, the magistrate judge found that D and Moffett had 'intentionally and willfully refused' to comply with his August 8 Order by not producing the ordered discovery. The magistrate judge fined D and Moffett sums of $5000 and $1000, respectively; ordered all discovery produced on November 20 and 24; promised to fine D and Moffett sums ranging from $5,000 to $125,000 in the event that discovery was not completed on November 20 and 24; threatened default judgment; and scheduled a criminal contempt hearing. On November 20 the parties settled their case on the record. Sunbeam agreed to pay Ps $500,000 and to produce 80 boxes of documents for McLaughlin's review. In addition, the parties agreed that the earlier August 8, November 1, and November 17 court orders would be vacated. The parties executed a 'Full and Final Settlement' that incorporated 'the terms and conditions . . . specifically set forth and recited on the record' at the November 20 hearing. The Agreement did not address the production of blanket remains, nor had that issue been set forth at the November 20 hearing as a term or condition of the parties' settlement. D had agreed to produce blanket remains in Florida and Mississippi, but this was never incorporated into the Settlement Agreement. On January 16, 2001, the district court dismissed the case, subject to reopening on either party's motion, or for good cause shown, within 90 days. In January 2001, d produced the 80 boxes of documents, and McLaughlin tagged 25,000 pages that he wanted copied. D withheld approximately 300 of the tagged pages as privileged, after what D claimed was a more thorough review of the files. D made available blanket remains in its Fort Lauderdale and Hattiesburg offices, and McLaughlin inspected the Fort Lauderdale blankets in January 2001 and the Hattiesburg blankets in June 2002 and February 2003. In February 2003 Ps moved to reopen the case and enforce the settlement. The district court granted the motion. The magistrate judge issued an order faulting Sunbeam for destroying blanket remains following the August 8 Order. The magistrate judge ordered the nearly 300 pages be submitted for in camera inspection so that he could determine whether they were discoverable. the magistrate judge found 'that D [had] destroyed or failed to produce items which were the subject of a discovery request and a court order.' He recommended that D be fined $200,000; that Moffett be fined $100,000; and that copies of his report be forwarded to the attorney disciplinary boards in the states in which Moffett was licensed. The district court affirmed. According to the court, D had an initial duty under the Federal Rules of Civil Procedure to preserve blanket remains once it learned of Ps' lawsuit, as well as a further duty to supplement discovery with blankets returned after the August 8 discovery order. It found that D had discarded blankets after the discovery requests and continued discarding blankets after the district court's August 8 Order. D and Moffett appealed.

Issues

Rule of Law

Holding and Decision

Legal Analysis

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