United States District Court, E.D. Pennsylvania
GENE E.K. PRATTER UNITED STATES DISTRICT JUDGE
After nearly six years of highly contentious franchise agreement litigation and a jury trial, one motion remains, a motion for sanctions filed by Plaintiffs for Defendants’ failure to produce certain documents that the defense ultimately sought to introduce at trial. In connection with rounds of finger-pointing and conventional briefing on the issue, the Court discussed the subject matter of the motion with counsel and the parties several times during the course of the nine-day trial. After carefully considering the materials themselves, as well as the parties’ oral representations, the Court will deny the motion for sanctions, finding that the defense acceptance of the suggested wisdom of forebearing from offering the unproduced documents or asking any witness about the issues discussed therein at trial was a sufficient sanction for this violation of Federal Rule of Civil Procedure 37(c)(1).
On July 15, 2005, Harold Selzer and Saul Levitt entered into the Store Development Agreement with Defendants (collectively referred to as “Dunkin’”), by which they became Dunkin’ Donuts franchisees. Plaintiff AAA Development & Management (“AAA Development”) is a corporate entity owned by Mr. Selzer and Joseph Glassman that was formed to develop various franchises, including the Dunkin’ franchises that were formed pursuant to the Agreement. A day before the Agreement was executed, Messrs. Selzer and Levitt entered into a development agreement with AAA Development, in which they agreed that AAA Development would be the exclusive developer of the Dunkin’ shops to be opened pursuant to the Agreement and that they would pay AAA Development a fee in the range of $350, 000 to $400, 000 for each shop.
Plaintiff AAA Yowza was formed to own a property at 2350 Mount Rose Avenue, York, Pennsylvania (the “Yowza site”), which Plaintiffs hoped to develop into a Dunkin’ shop. Mr. Levitt and AAA Yowza entered into a development agreement for the Yowza site on August 24, 2008. (Collectively, AAA Yowza and AAA Development comprise the “Corporate Plaintiffs.”)
As time wore on, the relationship between Messrs. Selzer and Levitt on the one hand and Dunkin’ on the other deteriorated. The parties sharply disagree about how and why this happened, but the end result was that Dunkin’ terminated the Agreement. Messrs. Selzer and Levitt argued that Dunkin’s conduct in ending the Agreement amounted to a breach of the Agreement, and Dunkin’, to no one’s surprise, argued that Dunkin’ was entitled to end the Agreement under its terms. In any case, given the termination of the Agreement, Messrs. Selzer and Levitt were unable to perform under their contracts with Corporate Plaintiffs.
Plaintiffs brought this lawsuit, alleging several claims against Dunkin’. Vigorously pursued and equally vigorously resisted motions to dismiss and for summary judgment whittled the case down to three claims: a claim for breach of contract brought by Messrs. Selzer and Levitt and two claims for tortious interference with contractual relations brought by Corporate Plaintiffs. The jury trial commenced on March 23, 2015.
The first witness at trial was Joseph Glassman, owner of AAA Development. After direct examination ended, the Dunkin’ counsel asked the Court for permission to use a small collection of theretofore unproduced documents to cross examine Mr. Glassman. These documents bore dates less than a year prior to the date Messrs. Selzer and Levitt entered into the Store Development Agreement with Dunkin’ and the development agreement with AAA Development, and described some problematic issues that had arisen during the course of other dealings between Mr. Glassman and Dunkin’, painting Mr. Glassman in an unfavorable light and making the relationship between Mr. Glassman and Dunkin’ appear much less smooth than Mr. Glassman had described during his direct testimony. More specifically, the documents largely dealt with the denial of Mr. Glassman’s application to become a Dunkin’ franchisee and the reasons for that denial, which included statements indicating that Dunkin’ employees disapproved of his business methods. Thus, the documents directly contradicted the impression Mr. Glassman tried to give during his testimony and, apparently, in his earlier dealings with Messrs. Selzer and Levitt. Plaintiffs’ counsel objected to the trial use of any such documents because they had not been produced during discovery. Defendants argued that the documents were “not relevant” until Mr. Glassman presented himself during direct examination as a model businessman with a long and solid relationship with Dunkin’, and that, even if they were relevant, they were privileged.
The Court reviewed the documents in camera and concluded that the documents were relevant and not privileged. Given that the documents were not produced during discovery despite disputing the Court’s finding that they were directly responsive to specific document requests served upon Dunkin’ over four years ago, counsel for Dunkin’ conceded that these documents, as well as the topic that they covered, should be excluded at trial. In addition, the Court invited Plaintiffs to file a motion for sanctions. Plaintiffs did so on March 26, 2015, and counsel for Dunkin’ responded a few days later. Between the filing of the sanctions motion and the date defense counsel responded, Messrs. Selzer and Levitt settled their breach of contract claim with Dunkin’, leaving only the Corporate Plaintiffs’ tortious interference claims. Before closing arguments, Plaintiffs dropped AAA Yowza’s claim, leaving only one count for the jury, namely, AAA Development’s tortious interference claim. After the trial ended with a defense verdict on AAA Development’s remaining count, Plaintiffs filed a reply to the defense opposition to the sanctions motion.
Federal Rule of Civil Procedure 37(c)(1) states that:
If a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless. In addition to or instead of this sanction, the court, on motion and after giving an opportunity to be heard:
(A) may order payment of the reasonable expenses, including attorney’s fees, ...