FILED

Case 2:11-cv-03695-RDP-TMP Document 190 Filed 03/12/15 Page 1 of 26

2015 Mar-12 PM 05:09

U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
DRUMMOND COMPANY, INC.,
Plaintiff ,
vs.
TERRENCE P. COLLINGSWORTH,
individually and as agent of Conrad & Scherer,
LLP; and CONRAD & SCHERER, LLP,
Defendants .

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Case No. 2:11-cv-3695-RDP-TMP

OPPOSED
Contains information designated as
Confidential Information under the
Protective Order.1

DRUMMOND COMPANY, INC.S REPLY BRIEF IN SUPPORT OF ITS MOTION FOR

SANCTIONS AND REQUEST FOR AN EVIDENTIARY HEARING

William Anthony Davis, III (ASB-5657-D65W)

H. Thomas Wells, III (ASB-4318-H62W)
Benjamin T. Presley (ASB-0136-I71P)
STARNES DAVIS FLORIE LLP
P.O. Box 59812
Birmingham, AL 35259
(205) 868-6000
fax: (205) 868-6099

Sara E. Kropf
LAW OFFICE OF SARA KROPF PLLC
1001 G St. NW, Suite 800
Washington, DC 20001
(202) 627-6900

Attorneys for Drummond Company, Inc.

Accordingly, Drummond is publicly filing a redacted version of

this reply brief to comply with the Stipulated Protective Order (Doc. 127).
Also, there are no new exhibits attached to this brief. All references to numerical exhibits
are to those attached to the Declaration of H. Thomas Wells, III filed with Drummonds
Renewed Motion for Sanctions (Doc. 174-1).

{B1924933}

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TABLE OF CONTENTS
TABLE OF AUTHORITIES................................................................................................................... ii
I. DEFENDANTS REPEATEDLY VIOLATED THIS COURTS OCTOBER 15, 2013 ORDER. ..........4
A.

Drummonds discovery requests called for the very documents that

reflect the payments
.................................5

B.

Defendants representations are irreconcilable with their new

contention that Drummonds discovery requests did not seek witness
payments. ........................................................................................................8

C.

Defendants cannot argue in good faith that

are not payments to witnesses...................................9

II. THERE IS OVERWHELMING EVIDENCE OF BAD FAITH BY BOTH DEFENDANTS WHICH

WARRANTS SANCTIONS PURSUANT TO THIS COURTS INHERENT POWER....................12
III. DEFENDANTS REMAINING ARGUMENTS ARE UNAVAILING. .......................................18
CERTIFICATE OF SERVICE ...............................................................................................................21

Case 2:11-cv-03695-RDP-TMP Document 190 Filed 03/12/15 Page 3 of 26

TABLE OF AUTHORITIES
Cases

Page(s)

Aztec Steel Co. v. Florida Steel Corp.,

691 F.2d 480 (11th Cir. 1982) ...........................................................................................19
Chambers v. NASCO, Inc.,
501 U.S. 32, 111 S. Ct. 2123, 115 L.Ed. 2d 27 (1991)..................................1, 2, 13, 16, 18
Flury v. Daimler Chrysler Corp.,
427 F.3d 939 (11th Cir. 2005) ...........................................................................................19
Hazel-Atlas Glass Co. v. Hartford-Empire Co.,
322 U.S. 238, 64 S.Ct. 997, 88 L.Ed 1250 (1944).............................................................18
In re Michael,
326 U.S. 224, 66 S.Ct. 78, 90 L.Ed. 30 (1945)..................................................................16
In re Se. Banking Corp.,
204 F.3d 1322 (11th Cir. 2000) ...........................................................................................1
In re Yorkshire, LLC,
540 F.3d 328 (5th Cir. 2008) .........................................................................................2, 17
Jones v. Graham,
709 F.2d 1457 (11th Cir. 1983) .........................................................................................13
Malautea v. Suzuki Motor Co., Ltd.,
987 F.2d 1536 (11th Cir. 1993) ...............................................................................6, 19, 20
National Hockey League v. Metropolitan Hockey Club,
427 U.S. 639, 96 S.Ct. 2778, 49 L.Ed. 2d 747 (1976).................................................19, 20
Nixon v. Admr of Gen. Servs.,
433 U.S. 425, 97 S. Ct. 2777, 53 L.Ed. 2d 867 (1977)........................................................2
S. New England Tel. Co. v. Global NAPs Inc.,
624 F.3d 123 (2d Cir. 2010)...............................................................................................20
United States v. One 32 Scorpion Go-Fast Vessel,
339 F. Appx 903 (11th Cir. 2009) ..............................................................................15, 17
Zocaras v. Castro,
465 F.3d 479 (11th Cir. 2006) ...........................................................................................19

ii

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Statutes and Rules

Page(s)

18 U.S.C. 401(1) .........................................................................................................................16

18 U.S.C. 1621............................................................................................................................16
Fed. R. Civ. P. 37.................................................................................................4, 6, 12, 17, 19, 20

iii

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He who tells a lie, is not sensible of how great a task he undertakes; for he must
be forced to invent twenty more to maintain that one. Alexander Pope
*

Defendants were ordered by this Court in Balcerobefore any testimony of any witness
had been takento disclose anything of value offered or given by Mr. Collingsworth, Conrad &
Scherer or their legal team to any witness on the Balcero plaintiffs Rule 26 disclosures. Ex. 21
(Balcero Doc. 332) at 6. Leading up to this Order, Mr. Collingsworth represented to this Court
that all such information had already been disclosed. Ex. 20 (Balcero Doc. 255) at 9. That was
false. At the time this representation was made, thousands of dollars in benefits had been offered
or paid
2

Drummond and this Court have spent considerable time, effort, and resources attempting
to uncover just how false Defendants initial representation in Balcero was. This Court made
clear, But I know this: We are going to get to the bottom of it . . . . Doc. 123 (Apr. 21, 2014
Hrg. Tr.) at 37:3-4. But throughout the course of this case, Defendants have attempted to
explain, excuse and defend their misrepresentations by creating many, many more. The lies have
snowballed to the point that it is impossible to discern which of their representations are true.
Even Defendants opposition brief, if its factual representations are assumed true, renders
even more of Defendants prior representations false. As just one example, Defendants now tell
the Court that Ivan Otero stopped representing paramilitaries in 2007, before ever meeting Mr.
Collingsworth
). Doc. 187 at 5;
2

Despite Defendants argument to the contrary, Doc. 187 at 18-19, it is proper for a district
court to consider violation of an order from a separate case where that wrongdoing is related to
the case at hand. In re Se. Banking Corp., 204 F.3d 1322, 1333 (11th Cir. 2000) (citing
Chambers v. NASCO, Inc., 501 U.S. 32, 57 (1991)).

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Doc. 187-2 (Otero Decl.) 21 & 22. If that is true, it means Defendants lied on June 21, 2013
in this case when they objected to producing communications with Otero on the basis that Mr.
Otero represents former paramilitaries who are providing testimony against Drummond in this
case. Doc. 43-12 (Defs Resp. to Drum. 2nd RFPs) at No. 8. It also means Mr. Collingsworth
lied in Balcero when he represented that Otero was counsel for El Tigre and Samario when they
signed their declarations for Mr. Collingsworth in 2009. Doc. 69-29 (Balcero Pls July 16, 2012
Resp. to Drum. 5th Irogs) at p. 11. The Court should see Defendants new arguments for what
they [are]: before-or-after-the-fact attempts to cloak [their] bad faith conduct with legal
arguments. In re Yorkshire, LLC, 540 F.3d 328, 332 (5th Cir. 2008).
The question squarely before the Court is this: How can this defamation case, which is
centered on what Defendants knew and when they knew it, continue to be litigated with any
confidence of a just result when neither Drummond nor this Court can trust that Defendants are
telling the truth? The fundamental problem is that this Court and Drummond and Defendants
own counsel have no choice but to rely on Mr. Collingsworth to answer the most critical
questions in this case, and even Defendants admit that Mr. Collingsworths credibility is
destroyed. Doc. 187 at 20 (the revelation of his misrepresentations regarding witness payments
has clearly hurt Mr. Collingsworths credibility before the Court).3
[T]he functioning of our adversary legal system . . . depends upon the availability of
relevant evidence in carrying out its commitments both to fair play and to the discovery of truth
within the bounds set by law. Nixon v. Admr of Gen. Servs., 433 U.S. 425, 477 (1977).
Where, as here, a litigants misconduct so deeply corrupts a case that the adversarial process is
irreparably harmed, dispositive sanctions are warranted. Chambers, 501 U.S. at 50-51 ([T]he
3

This reality alone renders completely untenable Defendants suggestion that this Court wait
until the case is over to determine whether default sanctions are warranted.

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bad-faith conduct by Chambers . . . was beyond the reach of the Rules; his entire course of
conduct throughout the lawsuit evidenced bad faith and an attempt to perpetrate a fraud on the
court, and the conduct sanctionable under the Rules was intertwined within conduct that only the
inherent power could address.).
Amazingly, with the exception of Mr. Collingsworths statements on April 21, 2014,
Defendants are totally unapologetic for their misrepresentations
. In fact, they portray themselves as innocent
litigants who dutifully interpreted Drummonds discovery requests to not call for documents
evidencing their payments. This fanciful self-portrayal cannot be squared with the facts.
Nor can it be reconciled with how they characterized Drummond prior to
. Before then, Defendants consistently
painted Drummond as an outrageous litigant that should be sanctioned for harassing the
Defendants with discovery requests for witness payment documents that Defendants had been
open and clear about disclosing in this case and in Balcero. Doc. 68 at 11. In fact, in their
opposition to Drummonds original sanctions motion, filed on April 14, 2014, Defendants
represented that
Defendants tune
has changed dramatically now that they have been caught withholding and altering the very
documents they represented they were open and clear about disclosing,
.
According to the Defendants, Drummond is no longer an abusive litigant, harassing Defendants
with duplicative discovery requests. Rather, Defendants now paint Drummond as a litigant in
an immaterial $500,000 lawsuit whose discovery requests were so inadequate that Drummond

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was never entitled to the open and clear disclosure of witness payments Defendants repeatedly
represented they had already made. Defendants cant have it both ways.
Defendants have made innumerable misrepresentations to Drummond and this Courtin
pleadings, under oath, and in response to direct questions in open courtall in an effort to hide
(and then explain and self-report when discovered) their witness payments. Even Defendants
most recent attempt at an explanation is irreconcilable with their prior representations. This
Court can and should enter a default judgment sanction against the Defendants.4
I.

DEFENDANTS REPEATEDLY VIOLATED THIS COURTS OCTOBER 15, 2013 ORDER.

Defendants argue that they should not be sanctioned under Rule 37 because they did not

disobey any court order. Doc. 187 at 8. To support this contention, Defendants claim that
when the Court entered its October 15, 2013 Order on Drummonds motion to compel, there
were no outstanding discovery requests for documents and information regarding
payments related to witness protection. Id. at 11 (emphasis in original). That assertion is
demonstrably false. Furthermore, Defendants position suggests this Courts Order was merely

Despite what Defendants opposition suggests, Drummonds Renewed Motion for Sanctions is
not about the ethics or legality of witness payments. That issue has been exhaustively briefed by
the parties since July of 2013 and is currently pending before the Special Master. Defendants
lies about their payments have nothing to do with whether the payments are somehow
permissible (which they are not). Drummonds motion is also not about whether it is permissible
for a United States law enforcement officer to pay confidential informants who are Colombian
narco-traffickers as an investigation technique in an international criminal investigation.
Drummonds motion is certainly not about whether Ivan Otero a Colombian criminal lawyer
who has a contingency fee interest in the civil cases in which his clients are testifying against
Drummond believes that
. Nor is Drummonds
motion about the truth of the Defendants defamatory letters, which Defendants claim they have
not yet had a chance to prove (despite conducting over a decade of intense discovery on that
topic). Yet, after receiving two extensions of time and two page extensions, Defendants devote
nearly a third of their brief to irrelevant discussions of these topics. Doc. 187 at 4-8; 25-30.
Drummond does not respond herein to these points, as they are not germane to the issue before
this Court. Drummonds silence, however, should not be construed as any concession of or
agreement with Defendants arguments.

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hypothetical and advisory. It is ludicrous to suggest this Court entered an order requiring the
production of documents and information concerning witness payments when there were no such
discovery requests pending.
A.

Drummonds discovery requests called for the very documents that reflect
the payments

Prior to October 15, 2013, Drummond served 105 requests for production and 20
interrogatories. At the time these requests were drafted, Mr. Collingsworth and his firm had
already in Balcero (1) been ordered to disclose anything of value offered or given to any witness,
and (2) represented that they had done so. See page 1, supra.

Drummonds first two sets of

discovery requests were therefore broader than those issued in Balcero, and called for every
document which Defendants now contend they had no obligation to disclose. Included among
those discovery requests were the following requests for production:
43. From January 1, 2000 to the present, all communications, including, but not
limited to, e-mails, letters, faxes, voicemails, between Defendants and Llanos Oil
or any of its principals, representatives, agents or employees.
64. From January 1, 2000 to present, all documents, including, but not limited to,
bills, invoices, cancelled checks, wire transfers, bank statements, expense reports,
tax returns, loan documents, payroll records, receipts, and credit card statements,
which evidence all expenses and costs that Defendants have incurred in pursuing
litigation against Drummond . . . . 5
5

This request was specifically discussed in Drummonds motion to compel as relevant to

discovering evidence of the source of witness payments. Doc. 43 at 20. At the October 10,
2013 hearing, this Court recognized that Drummonds case financing document requests could
uncover evidence of witness payments and held that they had to be produced:
THE COURT: I would say that thats got to be produced. I dont think thats
work product. In other words, if we have an operating fund for the firm, an
expense fund, and were pulling money from that in order to make security
payments, thats what youre concerned about.
MR. WELLS: Thats right.
THE COURT: Yeah, I think thats discoverable. Okay?

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8. All documents reflecting communications between Defendants or anyone

working on their behalf and Ivan Otero.
Docs. 43-10 & 43-12.

.6
Another of Drummonds requests essentially asked for all of Defendants
communications with anyone regarding Drummond or their allegations against Drummond.
Doc. 43-10 (1st Req. for Prod. No. 71). On August 28, 2013, counsel for the parties held a
telephonic discovery conference with this Court regarding the pending motions to compel,
during which the Court directed the parties to meet and confer to further narrow the disputed
requests. This Court subsequently entered an order directing the parties to file a joint report . . .
indicating their good-faith attempts to narrow the scope of the controversies between them.
Doc. 55. On September 18, 2013, the parties jointly filed their report. Doc. 60. The joint report
narrowed Request 71, at least as it related to communications between Defendants and their legal
team, to communications relating to the payment of witnesses, influencing of witnesses,
payments to witnesses families, payments to AUC members, payments to informants (both

Doc. 63 (Oct. 10, 2013 Hrg. Tr.) at 39:8-16 (emphasis added). Importantly, [o]ral orders are
just as binding on litigants as written orders; the consequences for violating an oral order are the
same as those for violating a written order. Therefore, in determining the propriety of the Rule 37
sanction, we consider both the judges written and oral discovery orders. Malautea v. Suzuki
Motor Co., 987 F.2d 1536, 1543 n.7 (11th Cir. 1993).
6

Case 2:11-cv-03695-RDP-TMP Document 190 Filed 03/12/15 Page 11 of 26

confidential and non-confidential) or payments to witnesses lawyers. Id. at 3. On October 2,

2013, Defendants sent a letter offering to log [] communications related to the payment of
witnesses, and acknowledging this Courts statement during the telephonic hearing that
discovery related to payment of witnesses was fair game. Doc. 62-4 at 3, 4.
Yet, Defendants now contend Drummonds requests did not even arguably seek
information related to the payment of witnesses. Doc. 187 at 11. They also argue that it was not
until this Courts October 2014 sea-change Order that they understood a payment to a witness
could include payment through a lawyer or to a family member. That simply makes no sense. A
proper response to Drummonds request for communications regarding witness payments, as
ordered in October 2013, would have netted virtually every document Drummond has just
recently discovered and which prove Defendants have been repeatedly lying about their witness
payments.

All of the documents evidencing

are

responsive to Drummonds 1st and 2nd Requests for Production, reflect the fact of payments to
witnesses, and were the express subject of this Courts October 15, 2013 Order. In violation of
that Order, these documents were withheld and not logged for over a year. Doc. 174 at 8-23.
What is worse, and directly relevant to the question of whether Defendants have acted in bad
faith, Defendants affirmatively represented these documents did not exist (or altered documents
that were produced) while simultaneously accusing Drummond of being an abusive litigant that
should be dealt terminating sanctions. Doc. 114 at 3, 16 (falsely representing that Defendants
have completed their response to the document requests that were the subject of this Courts

Case 2:11-cv-03695-RDP-TMP Document 190 Filed 03/12/15 Page 12 of 26

[October 15, 2013] Order and asking for dismissal as a sanction against Drummond).
B.

Defendants representations are irreconcilable with their new contention that

Drummonds discovery requests did not seek witness payments.

Prior to the October 10, 2013 hearing, the Defendants repeatedly represented that
Drummond had already served discovery requests that called for documents reflecting witness
payments. According to Defendants new position, all of those representations were lies. On
August 16, 2013, in an effort to quash one of Drummonds subpoenas and convince another
federal court to sanction Drummond, Mr. Collingsworth testified under oath that document
requests for payments to witnesses

had

either already been served on me in my capacity as counsel in the Balcero case or as a

Defendant in the underlying libel case, and that all responsive documents had been produced.
Doc. 101-5 at 5 & 12. He testified similarly to two other federal courts. Doc. 101-3 5 &
20; Doc. 101-4 10 & 19.7
Drummonds subpoena to IRAdvocates asked for everything concerning payments to
individuals incarcerated in Colombia,
Doc. 118-3. The
subpoena sought requests by a witness or family member for payment (Nos. 1 and 2), actual
payments to the witness or a family member (Nos. 5 and 6), and documents relating to any form
of assistance (whether monetary or nonmonetary in nature) to the witness or a family member
(Nos. 7 and 8). Id. Defendants sought sanctions against Drummond for serving these requests,

Drummond specifically discussed these false declarations in its brief. Doc. 174 at 25.
Defendants do not explain how those declarations could possibly be true or why those
declarations, standing alone, do not destroy their argument that Drummond had no discovery
requests outstanding as of October 15, 2013 which sought witness payments. Moreover, these
miscellaneous proceedings have been transferred to this Court. Defendants have made no
attempt to correct these false statements that are currently still being made to this Court.

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representing both in pleadings and in sworn testimony that these requests had already been
served on them and that all responsive documents had either been produced or logged:
Cutting through Drummond Company, Inc.s (Drummond) mudslinging and
innuendo, the objective reality is Drummond fails to address the sole issue that
should govern Movants motion that Drummonds subpoena to IRAdvocates
duplicates the document requests served on Defendants, and in responding to
those requests, Defendants have also searched for and produced documents that
were in the files of IRAdvocates.
Drummond Company, Inc. v. Terrence P. Collingsworth, et al., 2:14-mc-00621-RDP, Doc. 14
(Defs Oct. 24, 2013 Supp. Br.) at 1; see also Doc. 101-5 (Collingsworth Decl.) 23 (As
Drummonds document requests to IRAdvocates are virtually identical to requests already made
to the Balcero Plaintiffs and/or to me in the libel case, I can say that any non-privileged
documents that are responsive to the requests to IRAdvocates have already been produced.).
Therefore, Defendants cannot possibly represent to this Court that it was not until
February 11, 2014 that Drummond first served discovery requests seeking documents and
information concerning witness payments. Doc. 187 at 12.

In fact, Defendants objected to

those February 11, 2014 requests as being duplicative and repetitive to previous discovery
requests and represented that non-privileged documents have previously been produced that
are responsive to this request. Doc. 101-2 at p. 31 (emphasis added).8
C.

Defendants cannot argue in good faith that

are not payments to witnesses.

Defendants also attempt to justify their concealment

by arguing these payments were not direct payments by either Conrad &
8

Interrogatory No. 1 of Drummonds Third Set of Interrogatories similarly asked Defendants to

[i]dentify every instance in which the Defendants (or any member of their litigation team) have
made payments to witnesses in the litigation against Drummond, or payments to any Colombian
paramilitary or lawyer representing any Colombian paramilitary. Doc. 101-2 at p. 10.
Defendants also objected to this interrogatory as . . . duplicative and repetitive to previous
discovery requests. Id.

Case 2:11-cv-03695-RDP-TMP Document 190 Filed 03/12/15 Page 14 of 26

Scherer or Mr. Collingsworth to a witness or witnesss family, Doc. 187 at 14, and therefore
defendants had a good faith basis for objecting on this ground and construing payments to
witnesses narrowly as only those payments flowing directly from Conrad & Scherer to a witness
or a witnesss family. Id. at 19. According to Defendants, they were not required to disclose
these payments until after this Courts sea-change October 15, 2014 Order gave the operative
definition of payments to witnesses. Id. at 4, 14. That argument has no merit whatsoever.

For
Defendants to claim that these are indirect payments that did not qualify as payments to
witnesses within the meaning of the October 15, 2013 Order is utterly frivolous. Defendants
cannot excuse their misconduct by adopting an absurd interpretation of this Courts Order.
Malateau, 987 F.2d at 1543.

Defendants produced documents showing payments to

Charris on October 3, 2013 in response to Drummonds 1st and 2nd Requests for Production.
Those payments were made by Conrad & Scherer employees in Florida who withdrew cash from
Conrad & Scherers bank account and sent it via Western Union and MoneyGram to Yineth
Baeza in Colombia, who then deposited cash into Charris wifes bank account. Doc. 44-6;
Drummond Company, Inc. v. Terrence P. Collingsworth, et. al., 2:14-mc-01346-RDP, Doc. 129

10

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35. Baeza is an assistant for Francisco Ramirez Cuellar, who Mr. Collingsworth testified is
my local counsel in the Drummond human rights cases. Doc. 44-8; Doc. 69 (Nov. 7, 2013
Collingsworth Decl.) 23.

.10
Defendants not only misrepresented the existence of critical documents, they
intentionally altered

10

Defendants attribute their failure to log these payment documents in response to this Courts
October 15, 2013 Order to the inadequacy of their document searches prior to October of 2014.
Doc. 187 at n.10. That is hardly the credible explanation required to avoid sanctions. It is also
irreconcilable with what they represented to this Court on April 14, 2014: there is absolutely no
issue of the propriety of Defendants searches or the completeness of their production. Doc.
114 at 1. Moreover, it is belied by their argument that they made a conscious decision not to
disclose their payments to
because they were not responsive to
pending discovery requests. For that to be true, Defendants had to be aware that documents
reflecting those payments existed, and should have logged them. Instead, they produced multiple
supplemental privilege logs that omitted documents reflecting these witness payments. Exs.
11, 23, 24.

11

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Doc. 174 at 13-17. Defendants apparently think nothing of this egregious misconduct, as they
curtly state [i]n May 2014, defendants produced documents in which they redacted evidence of
security payments made by Conrad & Scherer to Ivan Otero. These documents did not in any
way mention or refer to witnesses or witness security payments. Doc. 187 at 14. In other
words, Defendants contend
does not have to be
produced because the document itself does not say payment to a witness. This exemplifies the
need for default sanctions. This case cannot be litigated where documents which Defendants
know evidence witness payments are withheld (unapologetically) simply because that fact is not
apparent from the face of the document.
Defendants cannot credibly argue they did not violate this Courts October 15, 2013
Order. Defendants violated that Order repeatedly, while simultaneously and falsely representing
that responsive documents did not exist. Doc. 174 at 8-23; see also Doc. 80 at 12 (The three
Balcero witnesses who received security assistance from Defendants, Libardo Duarte, Jose
Gelvez Albarracin, and Jairo Jesus Charris Castro, all first provided a written statement to
counsel for Plaintiffs or the Colombian authorities.). Defendants even altered documents they
did produce in order to hide the payments. Exs. 9, 10, 17 & 18. Default judgment sanctions
pursuant to Rule 37 are reserved for circumstances like these.
II.

THERE IS OVERWHELMING EVIDENCE OF BAD FAITH BY BOTH DEFENDANTS WHICH

WARRANTS SANCTIONS PURSUANT TO THIS COURTS INHERENT POWER.
Defendants and Drummond do agree on one point the imposition of sanctions pursuant

to a courts inherent power requires a showing of bad faith. Defendants, however, claim there

12

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is no evidence that Conrad & Scherer acted in bad faith.

Doc. 187 at 30.11

As to

Collingsworth, they contend there is not sufficient evidence that Mr. Collingsworth made [his]
statements [at the April 21, 2014 hearing] in bad faith. Id. at 20. To the contrary, Defendants
bad faith is exhibited by a continuous course of misrepresentations dating back years, both in this
case and in Balcero.
Defendants miss the point in arguing they cannot be sanctioned in this case for their
misrepresentations in Balcero. Doc. 187 at 18-19. Drummond is not asking this Court, in this
case, to sanction the Defendants for their violation of this Courts orders in Balcero. But
Defendants misrepresentations in Balcero are a crucial part of understanding why their conduct
in this case constitutes bad faith. Defendants acknowledge that [t]here was an order in Balcero
that related to witnesses, Doc. 187 at 19, and they offer no substantive response to Drummonds
point that this Order required the disclosure of their payments
Doc. 174 at 20-21.

Defendants do not dispute they violated that Order, and Defendants

concealment and misrepresentations in Balcero are evidence of a persistent course of fraudulent

conduct which warrants severe sanctions pursuant to this Courts inherent power. Chambers,
501 U.S. at 51-52; see also Jones v. Graham, 709 F.2d 1457, 1462 (11th Cir. 1983) (long
pattern of conduct warranted dismissal sanction).
This Courts order in Balcero is also critical because Defendants have repeatedly
referenced their discovery responses in Balcero and made them an integral part of their
misrepresentations in this case. For example, on July 18, 2013, Defendants represented to this

11

Conrad & Scherer and Collingsworth are equally responsible for all of the misrepresentations
discussed in Drummonds Renewed Sanctions Motion, which are in pleadings filed on behalf of
both Defendants. See Doc. 174 at 6-23. Conrad & Scherer also cannot sidestep responsibility
for the concealment of the payments
by claiming a lack of
knowledge of the payments. See id. at 7, 23 & n.12.

13

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Court that they had produced all responsive documents relating to witness payments because all
of the evidence Drummond has was produced by the Plaintiffs in the Balcero case, and
Plaintiffs produced every responsive document they had. Doc. 46 at 3 (underlined emphasis
added).

Exactly one year later, and after countless similar misrepresentations in between,

Defendants were still incorporating their Balcero discovery responses into false representations
that all witness payments had been disclosed:

Ex. 13 (Defs Crime-Fraud Reply Br.)

at 2 (emphasis in original).12
Defendants admit that Mr. Collingsworths false statements at the April 2014 hearing
constitute evidence of bad faith. Doc. 187 at 20. Defendants claim, however, that [a]t most,
Mr. Collingsworth has damaged his credibility before the Court. Id. at 21. Mr. Collingsworth
admits [t]here is simply no[] explanation for his conduct, but then offers the explanation that
he was
. Doc. 187-21 (Mar. 5, 2015 Collingsworth Decl.) at 3 & 13. This excuse
is simply not credible. This Court will no doubt recall that it made clear Mr. Collingsworth was
not expected to answer any questions himself. Doc. 123 (Apr. 21, 2014 Hrg. Tr.) at 30:17-18

12

Defendants also used this misrepresentation to obstruct Drummonds third party discovery
efforts. See, e.g., Doc. 101-3 (Aug. 19, 2013 Collingsworth Decl.) 5 (document requests
seeking payments to witnesses
have either
already been served on me in my capacity as counsel in the Balcero case or as a defendant in the
underlying libel case. Moreover, in my capacity as Defendant in the libel action and as counsel
in the Balcero litigation, I provided all responsive, non-privileged documents) (underlined
emphasis added).

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(JUDGE PROCTOR: Sure. Im trying not to put him on trial. Im going through counsel.).
Nevertheless, Mr. Collingsworth volunteered to respond, righteously stating, Your Honor, the
shortest way to the truth is to ask me the question. Thank you. Id. at 30:20-21.
Moreover, one week prior to that hearing, Defendants falsely represented that they had
completed their document search and supplemental log in full compliance with the Courts
discovery Order. Doc. 114 at 2. Mr. Collingsworth also testified that he was personally
involved in the document review, he receive[d] the last batch of responsive documents [on]
April 11, 2014, and that those documents were ready for production. Doc. 114-2 (Apr. 14, 2014
Collingsworth Decl.) 4. If that testimony was true, Mr. Collingsworth reviewed documents
reflecting

less than two

weeks prior to the April 21, 2014 hearing.

Mr. Collingsworth stood up before this Court and represented that

there were exactly three Balcero witnesses who received payments.
For Mr. Collingsworth to now claim that he
is not a credible explanation, nor one this Court should accept. United States v. One 32
Scorpion Go-Fast Vessel, 339 F. Appx 903, 905-06 (11th Cir. 2009). Mr. Collingsworths
explanation is further belied by the Defendants actions after the April 21, 2014 hearing. In the
nine months between the April 2014 hearing and Drummonds filing of the instant motion for
sanctions, Defendants did nothing to correct Mr. Collingsworths misrepresentation to this
Court. Mr. Collingsworths flippant statement in his declaration that he was swamped with
work in other cases in the months following the hearing is absolutely no excuse. Doc. 187-21 at
15. In fact, during those months Defendants

15

Case 2:11-cv-03695-RDP-TMP Document 190 Filed 03/12/15 Page 20 of 26

While perhaps the most egregious, Mr. Collingsworths false responses to this Courts
direct questions are nowhere near the only evidence of bad faith. To the contrary, Drummond set
forth a timeline of repeated misrepresentations made with the purpose of fraudulently concealing
witness payments, Doc. 174 at 8-23, which included specific examples that satisfy each of the
extreme situations Defendants admit warrant sanctions pursuant to a courts inherent power:
!

When fraud has been practiced upon the court, or the very temple of justice has
been defiled. Doc. 187 at 17.
o Mr. Collingsworth stood up in front of this Court and, after prefacing his answer
with the shortest way to the truth is to ask me, lied. Doc. 174 at 3-4. That is a
fraud upon the court. Moreover, the Defendants repeated misrepresentations that
they had produced all witness payments that ceased only after a third party
produced documents for in camera inspection constitutes a continuous course of
conduct that amounts to a fraud on the court. See Chambers, 501 U.S. at 49-51.

Where an attorney knowingly and recklessly raises a frivolous argument . . . . Doc.

187 at 17.
o Defendants repeatedly submitted knowingly false testimony in support of their
frivolous argument that Drummonds third party subpoenas should be quashed
(and Drummond sanctioned for serving them), because Defendants had already
disclosed all of their witness payments. Doc. 174 at 25. Defendants raised this
same false argument that they had produced all witness payments in numerous
other filings with this Court in an effort to hide the truth and disrupt this litigation
by opposing Drummonds motion to compel, avoiding sanctions, arguing against
the crime-fraud exception, and in support of their motion to clawback
privileged documents mistakenly produced by Parker Waichman. Docs. 46,
68, 80, 91, 114, Ex. 12, & Ex. 13.

By delaying or disrupting the litigation or hampering enforcement of a court order.

Doc. 187 at 17.

13

Defendants argue Mr. Collingsworth should not be held in contempt of court because his
statements to this Court on April 21, 2014 [did not] constitute perjury. Doc. 187 at n.12. The
key factor of 401, as it applies to Mr. Collingsworths misrepresentations in open court, was
whether his statements obstructed the administration of justicenot whether the statement meets
all the elements of 1621, the general perjury statute. A statement need not be made under oath
in order to constitute contempt of court. In re Michael, 326 U.S. 224, 228 (1945).

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Case 2:11-cv-03695-RDP-TMP Document 190 Filed 03/12/15 Page 21 of 26

o Defendants have displayed a continuous course of conduct (fraudulently

concealing witness payments) that spans years. Doc. 174 at 8-23. As Defendants
acknowledge, their conduct has caused substantial delay and forced Drummond to
incur tremendous cost in this proceeding (and other miscellaneous proceedings
associated with this action) just to obtain discovery of the fact of payments to
witnesses, something this Court ordered produced in October of 2013. See Doc.
114 at 3; Doc. 174 at 8-23.
!

When a party commits perjury or . . . doctors evidence that relates to the pivotal or
lynchpin issue in the case. Doc. 187 at 17.
o Mr. Collingsworth perjured himself three times in August of 2013 alone. Doc.
174 at 25. He continued to misrepresent the facts in subsequent declarations
signed under penalties of perjury in the months that followed in which he
represented that only three witnesses (Charris, Duarte, and Gelvez) were paid. Id.
at 10-13. He stood up in this Court on April 21, 2014, and repeated this lie. Id. at
3-4. Defendants altered evidence
Id. at 13-17.

When deciding whether to impose sanctions on Defendants under either Rule 37 or its
inherent authority, this Court sits as the trier of fact and decides whether Defendants
explanations are credible.14 See One 32 Scorpion Go-Fast Vessel, 339 F. Appx at 905; In re
Yorkshire, LLC, 540 F.3d at 332 (affirming courts authority to make credibility determinations
when imposing sanctions pursuant to its inherent power and rejecting before-or-after-the-fact
attempts to cloak . . . bad faith conduct with legal arguments).
Drummond cited abundant evidence of the Defendants repeated and willful
misrepresentations to this Court. In response, Defendants baldly deny all but one specific
instance, and then offer an explanation that cannot be reconciled with the facts as to why Mr.
Collingsworth did not act in bad faith on April 21, 2014. Defendants have not carried their

14

Defendants have offered absolutely no explanation for some of their misconduct. For
example, Mr. Collingsworth admits that there is no explanation for his statements to this Court
on April 21, 2014. Doc. 187-21 (Mar. 5, 2015 Collingsworth Decl.) 3. Nor did Defendants
offer any explanation regarding the declarations Mr. Collingsworth submitted in August of 2013,
in which he testified that documents reflecting payments
if any
existed, had already been produced or logged. Doc. 174 at 25. Nor do they explain their false
arguments made to three federal courts based on these declarations.

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Case 2:11-cv-03695-RDP-TMP Document 190 Filed 03/12/15 Page 22 of 26

burden of providing this Court with credible explanations for their actions, offering instead legal
arguments which are irreconcilable with their prior representations and the undisputed facts.
Sanctions pursuant to this Courts inherent power are warranted and necessary.
III.

DEFENDANTS REMAINING ARGUMENTS ARE UNAVAILING.

Defendants make the astounding assertions that there has been no procedural harm to

Drummond and Drummond has suffered no prejudice. Doc. 187 at 3 & 22. Defendants have
forced Drummond to expend substantial resources in this Court litigating a motion to compel,
motions to quash, a motion for sanctions, and briefing before the Special Master on various
issues, all in order to uncover witness payments this Court ordered produced in October of 2013.
Defendants moved to quash nearly every subpoena Drummond served, seeking sanctions against
Drummond for issuing them. As the Defendants have eagerly pointed out, this effort has caused
Drummond to incur tremendous costs. Doc. 114 at 3 (chastising Drummond for spending
millions of dollars on lawyers and filing subpoenas all over the country for witness payment
documents Defendants claimed they had already disclosed).
But it is not just harm to Drummond that demands severe sanctions here; Defendants
misconduct has damaged the integrity of the judicial process before this Court. Conduct that
undermines the integrity of the courts involves far more than an injury to a single litigant. It is
a wrong against the institutions set up to protect and safeguard the public. Chambers, 501 U.S.
at 44 (quoting Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 246 (1944)). The
damage to the judicial process would indeed be severe were a future litigant to read this record
and come away with the impression that they could engage in the same conduct Defendants have
without suffering severe penalties. For this reason, courts have the unquestioned authority to
impose sanctions even where a litigant suffers no prejudice:

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Case 2:11-cv-03695-RDP-TMP Document 190 Filed 03/12/15 Page 23 of 26

Rule 37 sanctions are imposed not only to prevent unfair prejudice to the litigants
but also to insure the integrity of the discovery process. Aztecs contumacious
conduct justified the district courts dismissal of the entire action. If we were to
hold otherwise, other parties to other lawsuits would feel freer than we think
Rule 37 contemplates they should feel to flout other discovery orders of other
District Courts.
Aztec Steel Co. v. Florida Steel Corp., 691 F.2d 480, 482 (11th Cir. 1982) (citing Natl. Hockey
League v. Metropolitan Hockey Club, 427 U.S. 639, 643 (1976)). Sanctions not only provide
redress for the harm suffered by Drummond, but also deter future parties from trampling upon
the integrity of the court. Zocaras v. Castro, 465 F.3d 479, 484 (11th Cir. 2006). 15
A default judgment is clearly a severe sanction. It is equally clear that this Court has the
authority to enter such a sanction if the offending party has acted willfully or in bad faith and a
lesser sanction will not suffice. Malautea, 987 F.2d at 1544 (a default sanction may be proper
even when not preceded by the imposition of lesser sanctions. When lesser sanctions would be
ineffective, Rule 37 does not require the vain gesture of first imposing those ineffective lesser
sanctions.); Flury v. Daimler Chrysler Corp., 427 F.3d 939, 944 (11th Cir. 2005). Here, there is
an overwhelming evidentiary record of Defendants willful and bad faith conduct in the face of
repeated warnings by this Court of the seriousness of the situation. See Doc. 63 (Oct. 10, 2013
Hrg. Tr.) at 45:23-46:12, 84:4-85:16; Doc. 105 (Apr. 3, 2014 Text Order); Doc. 123 (Apr. 21,
2014 Hrg. Tr.) at 19:6-16, 37:3-4.
Nevertheless, Defendants ask that this Court not enter a default judgment against them
because their incredible efforts . . . to comply with the Courts October 15, 2014 [Order] . . .
demonstrates that sanctions are wholly unnecessary to ensure defendants fully comply with all of

15

Contrary to Defendants argument, see Doc. 187 at 1, the purported merits of their defense
which, frankly, are dubious at this point should not dissuade this Court from severely
sanctioning the Defendants. Malautea, 987 F.2d at 1544 (the probable merit of a litigants case
does not preclude the imposition of a default judgment sanction against that litigant).

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Case 2:11-cv-03695-RDP-TMP Document 190 Filed 03/12/15 Page 24 of 26

their discovery obligations. Doc. 187 at 9.16 But it was Defendants year-long noncompliance
with the Courts October 15, 2013 Order (Doc. 64) that led to the entry of the October 15, 2014
Order.

Doc. 151 at 1.

Moreover, Defendants misrepresentations regarding the newly

discovered witness payments have nothing to do with any privilege log (the subject of the
October 15, 2014 Order), as the fact of witness payments is not privileged. Second, Defendants
actions after they were threatened with sanctions are no excuse for their prior misconduct:
[I]f parties are allowed to flout their obligations, choosing to wait to make a
response until a trial court has lost patience with them, the effect will be to
embroil trial judges in day-to-day supervision of discovery, a result directly
contrary to the overall scheme of the federal discovery rules. Moreover, . . .
compulsion of performance in the particular case at hand is not the sole function
of Rule 37 sanctions. Under the deterrence principle of [National Hockey
League], plaintiffs hopelessly belated compliance should not be accorded great
weight. Any other conclusion would encourage dilatory tactics, and compliance
with discovery orders would come only when the backs of counsel and the
litigants were against the wall.
S. New England Tel. Co. v. Global NAPs Inc., 624 F.3d 123, 148-49 (2d Cir. 2010). This is
particularly true where, as here, Defendants only disclosed their payment scheme after a
subpoena to a third party resulted in a document being produced to the Special Master which
would have revealed the scheme. See Malautea, 987 F.2d at 1541.
Defendants bad faith misconduct has rendered this case impossible to litigate. It is no
longer possible to expect to obtain credible, truthful answers to the most critical questions in this
case.

The adversarial system cannot function under these circumstances.

Defendants

misconduct has so deeply corrupted this case that it has become a fraud on the court, making a
default judgment not only proper, but the only viable outcome.
16

Defendants comment that they replaced their small insurance defense counsel with a strong
litigation team Doc. 187 at 4, does not give them license to whitewash their misconduct in this
case. Again, Drummond is seeking sanctions against the Defendants, not their counsel.
Defendants tell this Court they are a highly reputable law firm. Id. They should therefore
need no help understanding and complying with their duties to the judicial process.

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Case 2:11-cv-03695-RDP-TMP Document 190 Filed 03/12/15 Page 25 of 26

Respectfully submitted,
/s/ H. Thomas Wells, III
William Anthony Davis, III (ASB-5657-D65W)
H. Thomas Wells, III (ASB-4318-H62W)
Benjamin T. Presley (ASB-0136-I71P)
STARNES DAVIS FLORIE LLP
P.O. Box 59812
Birmingham, AL 35259
(205) 868-6000
fax: (205) 868-6099

/s/ Sara E. Kropf

Sara E. Kropf
LAW OFFICE OF SARA KROPF PLLC
1001 G St. NW, Suite 800
Washington, DC 20001
(202) 627-6900

Attorneys for Drummond Company, Inc.

CERTIFICATE OF SERVICE
I hereby certify that on March 12, 2015, I electronically filed the foregoing with the
Clerk of the Court using the CM/ECF system which will send notification of such filing to the
following:
Bradley J. Smith, Esq.
Eric D. Bonner, Esq.
Clark, Hair & Smith, P.C.
1000 Urban Center Drive
Suite 125
Birmingham, Alabama 35242
Christopher S. Niewoehner
Kendall Enyard
Savannah E. Marion
STEPTOE & JOHNSON, LLP
115 S. LaSalle Street
Suite 3100
Chicago, IL 60603
Tel: (312) 577-1240
Special Master T. Michael Brown, Esq.
Ms. Carly Miller, Esq.
Bradley Arant Boult Cummings, LLP
One Federal Place
1819 Fifth Avenue North
Birmingham, Alabama 35203
mbrown@babc.com
camiller@babc.com

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Case 2:11-cv-03695-RDP-TMP Document 190 Filed 03/12/15 Page 26 of 26

Kenneth McNeil
SUSMAN GODFREY
1000 Louisiana, Suite 5100
Houston, Texas 77002-5096
kmcneil@SusmanGodfrey.com
Robert Spotswood
William K. Paulk
SPOTSWOOD SANSOM & SANSBURY, LLC
One Federal Place
1819 Fifth Avenue North, Suite 1050
Birmingham, Alabama 35203
rks@spotswoodllc.com
wpaulk@spotswoodllc.com

/s/ H. Thomas Wells, III

H. Thomas Wells, III (ASB-4318-H62W)

22