Discovery sanctions are a fact of life in the courts and becoming more so in high stakes litigation. They can arise from judgment calls that are proved wrong by a court ruling, as in the case of HM Electronics, Inc. v. R.F. Technologies, Inc., 2016 WL 1267385 (S.D. Cal. March 15, 2016). There, the question arose regarding whether parties could compromise sanctions awarded by a magistrate judge in their settlement agreement in advance of the District Court decision to affirm that award.

Defendants (the client and its attorney) objected to the sanction award on the grounds that the parties’ settlement of their dispute, including the sanctions award, mooted the court’s jurisdiction to entertain the motion. The District Court agreed and vacated the sanctions award as moot. How did this happen?

The defendants were sanctioned for discovery misconduct under Rule 37 (for violation of prior discovery orders of the court) and under Rule26(g)(3) (raised by the court for improper certifications of discovery responses). This misconduct caused the plaintiff to incur great expense, and an award of compensatory sanctions was made to compensate plaintiff for the fees and costs involved in collecting discovery from defendants.

Two days before the hearing on discovery misconduct, the parties settled and dismissed the case, notifying the magistrate judge to vacate the motions that were scheduled to be heard. The hearing went forward partly because the magistrate judge held that the settlement could not affect the court’s right to pursue sanctions for the Rule 26 violations, which outlived the settlement. The court proceeded with the scheduled hearing, which resulted in a finding that the violations justified a compensatory sanctions award.

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