In Episode 168, Kelly Twigger discusses how the failure to provide initial disclosures led to the exclusion of evidence and denial of summary judgment and the importance of a party’s Rule 26 obligations in U.S. Bank N.A. v. Lindsey.
Introduction
Welcome to our Case of the Week segment on our podcast. My name is Kelly Twigger. I am the Principal at ESI Attorneys, a law firm for ediscovery and information law, and the CEO and founder at eDiscovery Assistant, where we take the insights from our practice and provide a knowledge platform for you to leverage the power of Electronically Stored Information (ESI). Thanks so much for joining me today.
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All right. Now, on with the show.
This week’s decision raises the crucial issue of providing initial disclosures under Rule 26 of the Federal Rules of Civil Procedure. If you’re not familiar with them, the 2015 amendments to the Federal Rules of Civil Procedure significantly changed initial disclosures under Rule 26. Small language change — enormous implications. The amendment emphasized a more mandatory and upfront disclosure of key information at the beginning of the case, including requiring parties to provide relevant documents as opposed to just those reasonably likely to lead to discovery of admissible evidence, which was the removed language.
Parties must identify key witnesses with relevant information early in the litigation process, as well as potential damages. The amended rule also provided for a stronger focus on proportionality and the need to disclose both helpful and harmful information to promote efficient discovery and reduce unnecessary litigation costs. Remember that prior to the amendment, parties only had to provide discovery to support their claims or defenses, which generally did not include harmful information. So, that addition of the harmful information is really what’s the most telling for me from the changes to the initial disclosure requirements under Rule 26(a).
The goal in making those changes for the Committee was to move litigation forward faster by requiring parties to exchange more information up front. I personally haven’t seen that play out as the Committee might have hoped, but it does put greater burdens on the producing party, and that reinforces the theme that you need to be prepared early to deal with discovery. Waiting until you’re facing initial disclosure deadlines is too late, because it’s going to be really hard to comply in time. You do, however, have the right to supplement.
You’ll also see, if you look back at episodes of Case of the Week that deal with initial disclosures from our Academy, that there are similar issues that come up for failure to supplement, other than what we’re going to see today, which was a failure to provide initial disclosures at all.
Background
This week’s decision comes to us from U.S. Bank N.A. v. Lindsey, and it shows the importance that the courts place on initial disclosures and how the failure to provide them can have catastrophic consequences.
This week’s decision is in a smaller case. What is a small case, you ask? Well, that’s a really good question. This is a mortgage foreclosure matter worth about $160,000, and it emphasizes that the issues and obligations of counsel are the same no matter what size case you are talking about. Repeat that to yourself three times over.
This decision is from January 23, 2025. Written by United States Magistrate Judge Yvonne Ho. Magistrate Judge Ho has 14 decisions in the database and the issues for this week’s case include: failure to produce, sanctions, exclusion of evidence and initial disclosures, and the key is really in the issue tags.
Facts
What are the facts here before us? Well, they’re pretty straightforward. U.S. Bank seeks a declaratory judgment and to foreclose on real property located in Texas and to recover the $160,000+ payoff balance on the note for the loan that was held by the plaintiff. In response to the bank’s motion for summary judgment, the defendant, Diana Lindsey, argued that U.S. Bank’s evidence should be stricken and that summary judgment should be denied because U.S. Bank wholly failed to produce or identify any evidence or witness during discovery. Just sit with that for a second. I know it’s a little hard to believe. Interestingly, in what should otherwise have been a slam dunk of a case, U.S. Bank did not file a reply to the summary judgment or dispute the allegations made by Lindsey. Other facts in the case are that the parties had agreed that they would file their initial disclosures by March 4, 2024, but US Bank never provided those disclosures.
So with those facts in mind, we’ll turn to the Court’s analysis.
Analysis
The Court looked immediately at Rule 26(a)(1), which imposes a duty on all parties to provide initial disclosures that disclose specific information “without awaiting a discovery request.” Most pertinent here, a party must disclose certain key information that it may use to support its claims or defenses:
- names and contact information “of each individual likely to have discoverable information,” along with the subjects of that information, unless the use would solely be for impeachment;
- a copy of “all documents” within the party’s possession, custody or control, unless those documents would solely be used for impeachment; and
- the disclosing party’s computation of damages.
Looking at the Bank’s motion for summary judgment and Rule 26, the Court found that by failing to make its disclosures, U.S. Bank (1) never identified the mortgage coordinator as a witness, (2) failed to disclose the documents attached to its summary judgment motion, and (3) did not provide any computation of damages, all three of which are required by Rule 26(a). The Bank then compounded its issues by failing to provide documents on damages, even after Lindsey requested them in discovery with ample time before the discovery cutoff.
So you’ve got: (1) failure to provide the initial disclosures that are required by Rule 26, and (2) failure to respond to a discovery request asking for the same information that would be required by Rule 26.
According to the Court, “[a] party who fails to provide information or identify a witness through initial disclosures or proper supplementation of discovery responses is not allowed to use that information or witness to supply evidence on a motion unless the failure was substantially justified or is harmless. This sanction is ‘automatic and mandatory’ unless the party shows that its violation of Rule 26(a) was either justified or harmless.”
Because U.S. Bank didn’t respond to the response brief — they didn’t file a reply — the Court found that the bank offered no justification for its “wholesale failure to comply with its discovery obligations by providing basic disclosures and timely producing the documents now proffered to support its claims. Nor has U.S. Bank attempted to rebut Lindsey’s showing that the lack of timely disclosure and production has prejudiced Lindsey’s defense, including Lindsey’s ability to designate and proffer a damages expert and otherwise challenge the amount owing on the loan.”
Basically, U.S. Bank didn’t provide any information to Lindsey whatsoever to make its case and just sought to ram it through the Court on a summary judgment motion. Fortunately, Lindsey’s counsel was paying attention and knew the Rule 26 requirements on initial disclosures and raised them. As a result, the Court found that the Bank had not met its burden to show that the failure to comply with Rule 26 was substantially justified or harmless and struck all of the undisclosed evidence attached to U.S. Bank’s summary judgment brief.
The Court went further to find that the noncompliance was fatal to U.S. Bank’s motion for summary judgment and denied the motion for summary judgment outright.
Immediately after the decision, and, I’m guessing, with a great deal of panic, U.S. Bank objected to the Magistrate Judge’s ruling discussed here and argued that its failure to make disclosures was harmless. The District Court rejected that argument, finding that in the Fifth Circuit, the failure to make the harmless objection to the Magistrate Judge waived the argument.
Takeaways
What are our takeaways here?
Well, I chose this case today because it makes a very important point: The rules of the court are applied to a case no matter how much is at stake or who the parties are. We often touch on large, complicated, sophisticated matters here — whether they’re class action cases or cases between two sophisticated parties — because they see a lot of the complexity in ediscovery disputes that allow us to have conversation about them here on Case of the Week, and so that makes sense. But if you are counsel in a matter that you deem to be small, you cannot take liberties with the rules and expect not to be slapped like U.S. Bank was here. It’s critical that you know and understand the rules and that you follow them for every dispute. I would make the argument that it’s even more critical that the smaller your case, the more attention you pay to those rules.
Here, it played out very successfully for defense counsel because they knew the rules and they probably knew all along that the failure for U.S. Bank to disclose the information of witnesses and documents in a very simple, very straightforward factual case regarding a foreclosure on a property should not have happened. There’s really no excuse for it not to happen. U.S. Banks’ failure to provide those disclosures means that they’ll now have to go to trial to foreclose on this property, an expense that will probably eat away at the recovery substantially, since it’s worth $160,000. Foreclosure cases are pretty simple, but defense counsel here was again savvy enough to know and leverage Rule 26(a) to provide a viable defense for their client. Knowing the rules and the case law is absolutely critical in discovery today. It’s widely acknowledged that it is more expensive to litigate in federal court than state court, but I see that changing a little bit because more states are coming into line with the federal rules on initial disclosures and proportionality.
Florida recently changed their rules to bring them in line with the Federal Rules of Civil Procedure and it will dramatically change litigation in that state. There were a number of objections from state court judges, indicating that they didn’t feel as though they had the resources that are available to federal courts to be able to litigate in the same way that litigants do in federal court. So we’re going to see how that plays out, but I think it just is really important, even as we look at cases under the Federal Rules of Civil Procedure, that if you’re practicing in state courts, counsel know and understand these obligations.
This case also raises a key opportunity to discuss the changes that were brought by the 2015 amendments to Rule 26, and those include a broader scope of disclosure. First, parties are now required to disclose a wider range of relevant information early on, including not just information supporting their own claims, but also information that could potentially be harmful to their case.
Second, a proportionality focus. The amendments incorporated a proportionality standard, meaning that the amount and type of information that is disclosed should be relevant and scaled to the complexity and importance of the case.
Third, early disclosure of key players. Parties must identify witnesses with relevant information early on in the litigation process. Failure to do that here was fatal to U.S. Bank’s motion. You can supplement your initial disclosures, and we’ve seen decisions here on Case of the Week in which a failure to supplement initial disclosures also resulted in the exclusion of witnesses and in documentary evidence.
Fourth, electronic discovery considerations. The amendments address the challenges of electronically stored information by requiring parties to disclose their preservation efforts and relevant ESI categories.
Finally, providing a duty to confer and cooperate. These rules encourage parties to actively engage in early case planning and meet and confer to discuss ediscovery needs and potential issues.
These changes to the rules in 2015 did not get nearly the attention that the 2006 amendments did, but they provide a lot of clarification as to how courts expect parties to behave in the face of increased volumes and complexity of ediscovery. Litigators often feel like the Rule 26 disclosures are throwaways and an exercise in futility that is not very valuable, but that’s not how the courts see them. The rules were specifically changed to try and move litigation forward faster by requiring parties to exchange information at early stages so that both sides can evaluate the case faster.
Initial disclosures are important. Of our more than 165 episodes here on Case of the Week, 15 of them have touched on initial disclosures. Know the rule and your obligations under it and be prepared to meet them, or you’ll find your evidence being excluded down the road, just like U.S. Bank did here.
Conclusion
That’s our Case of the Week for this week. Be sure to tune in for our next episode, whether you’re watching us via our blog, YouTube, or downloading it as a podcast on your favorite podcast platform. You can also find back issues of Case of the Week on your favorite podcast platform and be sure to subscribe, as we’ll be adding new content apart from the Case of the Week segments. There are some exciting things coming with the podcast in the next couple of weeks, and we look forward to sharing those with you. Have a great week!
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