800-426-7965

Parsi v. Daioleslam, Circuit Court Affirms Sanctions as the “Wages of Appellants’ Dilatory, Dishonest, and Intransigent Conduct” During Discovery

The Appellants in this case, the National Iranian American Council (“NIAC”) and its cofounder, Trita Parsi, appealed the imposition of discovery sanctions by the District Court. In the underlying case, NIAC alleged that the Defendant, Seid Hassan Daioleslam, the publisher of the website, Iranianlobby.com, defamed them in articles and blog posts by stating that they had secretly lobbied on behalf of the Iranian regime in the United States. NIAC sought damages, claiming that Daioleslam’s conduct had damaged their reputation and harmed public support for NIAC. The District Court granted summary judgment in Daioleslam’s favor and entered final judgment as a result of NIAC’s repetitive discovery abuses. On appeal, NIAC contended that the District Court had abused its discretion when it imposed discovery sanctions which included the costs associated with forensic imaging, re-deposing witnesses, subpoenaing third parties, preparing sanction motions, and in establishing the date of post-judgment interest to run from the date of summary judgment.

During discovery, despite using Microsoft Outlook as its email client, NAIC repeatedly failed to produce employee’s calendar records and denied it owned a server. NAIC also failed to produce membership information and withheld laptops with relevant information. To address the recurring discovery issues, the District Court issued three orders (July 2010, March 2011 and August 2011) compelling NAIC to produce relevant information.

In its Sanctions Order, the District Court concluded that NIAC had violated its July 2010 and March 2011 Orders. The District Court observed that even if NAIC did not possess a “server,” it was obligated by its July 2010 order to produce all the computers on which it stored relevant data for the first forensic imaging. As NAIC’s disobedience to the court’s July 2010 Order required two additional rounds of imaging, the District Court ordered NIAC to pay for the later rounds of imaging. The Court also ordered NIAC to pay Daioleslam’s reasonable expenses in bringing part of his motion for sanctions and ordered NIAC to pay half the cost of re-deposing one of its employees.

After review, the Circuit Court concluded that the District Court was well within its discretion when it sanctioned the Appellants under Rule 37. The Circuit Court first turned to the Appellants’ assertion that the District Court abused its discretion by awarding Daioleslam’s expenses in bringing three motions to compel NIAC’s production of its server, asserting that their opposition to the motions was “substantially justified.” The Circuit Court observed that a party is “substantially justified” in opposing discovery if there was a genuine dispute or a reasonable person might differ as to whether the discovery was appropriate. The Circuit Court noted that “reasonable people” could not disagree about whether relevant documents could be withheld without a privilege claim. The Circuit Court found that NIAC’s calendar entries were relevant to Daioleslam’s defense in that they might have revealed meeting with officials that suggested the truth of the alleged defamatory statements. The Circuit Court held that after the District Court rejected NAIC’s arguments and ordered discovery of the calendar data, they were not entitled to continue to oppose production. The Circuit Court observed that the Daioleslam’s second and third motions to compel did not give NIAC the right to continue to contest the imaging of NIAC’s calendar data.

Addressing the sanction which awarded Daioleslam’s expenses for the second and third imaging of NIAC’s hard drive, the Circuit Court held that the cost of the imaging resulted from Appeallants’ failure to produce the computers on which it stored calendar records. The Circuit Court rejected the Appellants’ argument that it could not produce a server as it only had a “shared hard drive” to store data, not a central exchange server, calling it “semantics.” The Circuit Court observed that even if it did not have a server, NAIC knew that the purpose of the imaging was to produce and review unedited calendar records. The Circuit Court found “inexcusable” the Appellants’ “resolute failure to produce all relevant drives until a year after it was first ordered to do so.” The Circuit Court also reasoned that Daioleslam’s expenses in re-deposing two of NIAC’s principals resulted from NAIC’s disobedience of the District Court’s order by withholding key documents for questioning the deponents and were a legitimate subject of Rule 37(b) sanctions.

The Circuit Court held that the District Court made the proper finding of bad faith when it imposed the sanctions. The Circuit Court observed that the District Court described the NIAC’s withholding of relevant emails as “indefensible” and “inexplicable,” noting further that NIAC had made no attempt to explain the omission. The Circuit Court indicated that the District Court’s “reproach” for the Appellants’ conduct was evident, and was “based on a firm conviction that they had abused the discovery.” The Circuit Court held that in light of the fact that Appellants failed to explain why they withheld numerous documents, and made misrepresentations to the District Court did not err in finding that the Appellants acted in bad faith.

The Circuit Court observed that during discovery, NAIC “engaged in a disturbing pattern of delay and intransigence.” The delay and failure observed the Circuit Court, caused Daioleslam to waste resources and time deposing multiple witnesses and subpoenaing third parties for emails Appellants should have produced. The Circuit Court was also disturbed by Appellants’ misrepresentation to the District Court that they did not possess key documents and the fact that they “flouted” multiple court orders. The Court found that the sanctions, “all implicate an enduring issue: the power of a district court to sanction those who disobey its instructions and interfere with its proceedings.”

Concluding, the Circuit Court affirmed the majority of the District Court’s sanctions as “the wages of Appellants’ dilatory, dishonest, and intransigent conduct.” However, finding that the District Court applied the incorrect standard for sanctioning, the Circuit Court reversed the award for Appellees’ preparation of portions of a sanction motion relating to bad-faith alterations of a document and false interrogatory responses. The Circuit Court also reversed the decision to award of post-judgment interest to run from the date of summary judgement.

Parsi v. Daioleslam, 2015 WL 525146 (D.C. Cir. Feb. 10, 2015)

Comments are closed.

Scroll to Top