United States District Court, D. Nebraska
MEMORANDUM AND ORDER
Smith Camp, Senior United States District Judge.
matter is before the Court on the Objection to Magistrate
Judge Order, ECF No. 260, filed by Defendant Churchill Lane
Associates, LLC. For the reasons stated below, the Objection
will be overruled.
Judge Michael Nelson denied Churchill's Motion for an
Order to Show Cause, ECF No. 212, why ACI Worldwide Corp.
should not be sanctioned under Rule 37(b)(2)(A) of the
Federal Rules of Civil Procedure for failing to comply with
two discovery Orders, ECF Nos. 190 & 208.
March 23, 2018, Judge Nelson ordered ACI to supplement
certain areas of its production of evidence and to confer
with Churchill on other outstanding discovery issues. ECF No.
190. On August 20, 2018, Judge Nelson ordered ACI to produce
several specific documents by September 10, 2018. ECF No.
208. After ACI produced the additional documents and
information, Churchill identified deficiencies in ACI's
original production and now claims that ACI intentionally
withheld certain information to reduce its post-termination
royalty liability. Churchill also claims ACI violated Judge
Nelson's Orders by not sufficiently supplementing its
production. Accordingly, Churchill filed the Motion for an
Order to Show Cause why the Court should not sanction ACI by:
1. finding that all sublicenses between ACI and its
affiliates and 139 customers . . . were in effect immediately
before ACI terminated the License Agreement on July 21, 2014
and are still in effect; and
2. awarding Churchill post-termination royalties of 15% of
fraud detection related income disclosed by ACI in its public
disclosures, which, through 2018, amounts to post-termination
royalties in the amount of $48, 307, 450.00.
ECF No. 212.
Nelson found ACI committed no willful violation of the
Court's discovery orders and that Churchill's
requested relief was neither reasonable nor justified. Order,
ECF No. 259. As such, he denied Churchill's Motion, and
Churchill objected under Rule 72(a).
party objects to a magistrate judge's order on a
nondispositive pretrial matter, a district court may set
aside any part of the order shown to be clearly erroneous or
contrary to law. Fed.R.Civ.P. 72(a); 28 U.S.C. §
636(b)(1)(A). “A finding is ‘clearly
erroneous' when although there is evidence to support it,
the reviewing court on the entire evidence is left with the
definite and firm conviction that a mistake has been
committed.” Chase v. Comm'r, 926 F.2d 737,
740 (8th Cir. 1991) (quoting United States v. U.S. Gypsum
Co., 333 U.S. 364, 397 (1948)). “An order is
contrary to law if it ‘fails to apply or misapplies
relevant statutes, case law, or rules of
procedure.'” Haviland v. Catholic Health
Initiatives-Iowa, Corp., 692 F.Supp.2d 1040, 1043 (S.D.
Iowa 2010) (quoting Knutson v. Blue Cross & Blue
Shield of Minn., 254 F.R.D. 553, 556 (D. Minn. 2008)).
courts are given deference and “great latitude”
in exercising their discretion to impose sanctions for
discovery violations under Rule 37 or their inherent powers.
Heartland Bank v. Heartland Home Fin., Inc., 335
F.3d 810, 815 (8th Cir. 2003) (citing Martin v.
DaimlerChrysler Corp., 251 F.3d 691, 694 (8th Cir.
2001)); see also Holmes v. Trinity Health, 729 F.3d
817, 820 (8th Cir. 2013) (giving “substantial
deference” to the district court's denial of
discovery sanctions); see generally Sentis Grp. v. Shell
Oil Co., 559 F.3d 888, 899 (8th Cir. 2009) (emphasizing
“that the better practice is to apply Rule 37 where
appropriate and not allow an exercise of inherent power to
obscure the Rule 37 analysis”). Generally, courts
reserve the most severe sanctions for willful violations.
Burgett v. Gen. Store No Two, Inc., 775 F.3d 990,
992 (8th Cir. 2014) (dismissal); St. Louis Produce Mkt.
v. Hughes, 735 F.3d 829, 832 (8th Cir. 2013) (striking
requested sanctions are among the most severe. Churchill asks
the Court to make findings against ACI that would prevent it
from challenging the merits of Churchill's
breach-of-contract claim and the amount of damages. Thus, it
was not contrary to law for Judge Nelson to consider whether
ACI willfully violated the Court's discovery orders, and
Churchill has not demonstrated that his finding of no willful
violation was clearly erroneous. See Hughes, 735