     Case: 16-20734      Document: 00514111450         Page: 1    Date Filed: 08/10/2017




           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                           United States Court of Appeals
                                                                                    Fif h Circuit
                                    No. 16-20734                                  FILED
                                  Summary Calendar                          August 10, 2017
                                                                             Lyle W. Cayce
                                                                                  Clerk
OPREX SURGERY (BAYTOWN), L.P.,

              Plaintiff - Appellant

v.

SONIC AUTOMOTIVE EMPLOYEE WELFARE BENEFIT PLAN,

              Defendant - Appellee




                   Appeal from the United States District Court
                        for the Southern District of Texas
                             USDC No. 4:14-CV-2330


Before JOLLY, SMITH, and GRAVES, Circuit Judges.
PER CURIAM:*
       Plaintiff-Appellant Oprex Surgery (Baytown), L.P. (“Oprex”) appeals
from the district court’s dismissal of its lawsuit as a sanction for purported
“recalcitrance and disobedience” that “violate[d] the rules and court orders.”
Because the district court abused its discretion in dismissing Oprex’s case, we
reverse and remand.



       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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                                        No. 16-20734
       Defendant-Appellee Sonic Automotive Employee Welfare Benefits Plan
(“Sonic” or “the Plan) is a self-funded employee benefits plan governed by the
Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001
et seq. Oprex is a surgery center operating in Baytown, Texas. It acted as an
“out-of-network” or “non-participating” provider of medical services to certain
members of the Plan. Oprex, as authorized representative of these members,
sued Sonic, inter alia, under § 1132(a)(1)(B) to recover benefits due under the
Plan for services Oprex provided. During pre-trial discovery, Sonic requested
a status conference to address unspecified discovery issues. The court granted
its request and scheduled a telephone conference on October 4, 2016. That
same day, the court sua sponte dismissed the case on the grounds that Oprex
“failed in its responsibility to support its case” and “evaded two direct orders
about the underlying data and related algorithms or other techniques for
calculating its prices.”
       We review the district court’s dismissal for abuse of discretion. Natl.
Hockey League v. Metro. Hockey Club, Inc., 427 U.S. 639, 642 (1976); FDIC v.
Conner, 20 F.3d 1376, 1380 (5th Cir. 1994). Although the district court did not
specify the authority it relied upon in ordering dismissal, the parties agree that
this matter is appropriately reviewed under the standard governing discovery
sanctions pursuant to Federal Rule of Civil Procedure 37. 1                     Rule 37(b)(2)



       1  We note that Federal Rule of Civil Procedure 41(b) also permits a district court to
dismiss a plaintiff’s action for “failure to prosecute or to comply with these rules or a court
order.” Fed. R. Civ. P. 41(b); Sturgeon v. Airborne Freight Corp., 778 F.2d 1154, 1159 (5th
Cir. 1985). The district court’s statement that Oprex “failed in its responsibility to support
its case” suggests a failure to prosecute as a ground for dismissal. In so far as failure to
prosecute constituted a ground for dismissal, we would similarly hold that the court abused
its discretion. See Morris v. Ocean Sys., Inc., 730 F.2d 248, 252 (5th Cir. 1984) (We will affirm
dismissal under Rule 41(b) only “upon a showing of (a) a clear record of delay or contumacious
conduct by the plaintiff’, and (b) where lesser sanctions would not serve the best interests of
justice.” (emphasis added)); accord Sturgeon, 778 F.2d at 1159. We fail to see a showing,
much less a clear showing, of either factor on the record before us.
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                                  No. 16-20734
“empowers a district court to impose ‘just’ sanctions on parties who disobey a
discovery order.” Conner, 20 F.3d at 1380. These sanctions may include
“dismissing the action in whole or in part.” Fed. R. Civ. P. 37(b)(2)(A)(v).
“While the trial judge, who is most familiar with the circumstances
surrounding the litigation, has broad discretion under Rule 37(b) to fashion
remedies suited to the misconduct, we have imposed important limitations on
that discretion.” Pressey v. Patterson, 898 F.2d 1018, 1021 (5th Cir. 1990).
      “[D]ismissal is a severe sanction that implicates due process.” Moore v.
CITGO Refining and Chemicals Co., L.P., 735 F.3d 309, 315 (5th Cir. 2013)
(quoting Conner, 20 F.3d at 1380). Although it “must be available to the
district court in appropriate cases,” Natl. Hockey League, 427 U.S. at 643, this
“draconian remedy” “should not be used lightly, and should be used . . . only
under extreme circumstances,” Conner, 20 F.3d at 1380 (quoting EEOC v. Gen.
Dynamics Corp., 999 F.2d 113, 119 (5th Cir. 1993)); see also Marshall v.
Segona, 621 F.2d 763, 768 (5th Cir. 1980) (“[D]ismissal is to be sparingly used
and only in situations where its deterrent value cannot be substantially
achieved by use of less drastic sanctions.”).
      Thus, we have held that several factors must be present before a district
court may dismiss a case with prejudice as a sanction for violating a discovery
order: (1) “the refusal to comply results from willfulness or bad faith and is
accompanied by a clear record of delay or contumacious conduct”; (2) the
violation must be attributable to the client instead of the attorney; (3) the
violating party’s misconduct must substantially prejudice the opposing party’s
preparation for trial; and (4) “a less drastic sanction would [not] substantially
achieve the desired deterrent effect.” Conner, 20 F.3d at 1380–81 (citations
omitted); see also Batson v. Neal Spelce Assocs., Inc., 765 F.2d 511, 514 (5th
Cir. 1985).


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                                       No. 16-20734
       As a preliminary matter, we observe that the district court made no
explicit findings in its dismissal order as to any of the Conner factors. A district
court need not provide specific factual findings in every sanction order;
however, our review must reveal an adequate basis in the record for the
sanction imposed. Topalian v. Ehrman, 3 F.3d 931, 936 (5th Cir. 1993). If the
sanctions are substantial, our review necessarily will be more rigorous as such
sanctions must be quantifiable with some precision. Id. (quoting Thomas v.
Capital Sec. Servs., 836 F.2d 866, 883 (5th Cir.1988) (en banc) (discussing
sanctions under Fed. R. Civ. P. 11)). The record here falls far short of what we
have deemed is sufficient to justify dismissal.
       First, it is not apparent from the record that Oprex refused to comply
with the two discovery orders at issue, much less did so willfully or in bad faith.
The first of these two discovery orders, issued on July 1, 2016, required in
pertinent part that the parties exchange by August 11, 2016, “the documents
relevant to this claim, including data explaining how Oprex Surgery
(Baytown), L.P., determines its prices.” 2 By declaration of its trial counsel,
Oprex represents that it provided Sonic with the documents and information
required by the court’s order, and it submits the email correspondence
demonstrating its compliance. The email from Oprex’s counsel concludes, “If
you need any explanations or clarification, please feel free to call[.]” After
Sonic raised some issues with the information provided, Oprex’s counsel


       2  From the face of the order, it is unclear to what “this claim” refers or the scope of
documents that would be relevant to it; however, we surmise from the transcript of the
hearing on that date that the court is referring to the “one issue” that it perceived to be
relevant to Oprex’s § 1132(a)(1)(B) claim: “What is the reasonable price for the services that
were necessary and actually performed [by Oprex]?” Oprex contends that this issue is, in
fact, irrelevant to its claim because it is suing solely to recover benefits due under the Plan,
which are capped at “the allowed amount” set by the Plan, unless the provider’s billed charge
is less than the allowed amount. As Oprex never objected to the court-ordered discovery, we
draw no conclusions as to the relevance of Oprex’s pricing, or its reasonableness, to any of
the claims on which it is suing.
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                                   No. 16-20734
attempted to confer with Sonic’s counsel numerous times, but was unable to
discuss the matter before the next pretrial conference that was held on August
29, 2016. At that conference, various discovery-related issues were discussed
and Oprex’s counsel expressed willingness to supplement Oprex’s responses
with the additional materials Sonic desired. The court warned Oprex’s counsel
that if the requested information was not provided, “they [referring to Oprex]
lose. It’s real easy. . . . They have got to prove the case.”
      Following the conference, the court issued its second pertinent discovery
order, dated August 29, 2016, which directed Oprex to provide Sonic by
September 9, 2016, “[t]he program and algorithm [Oprex] used to set billable
rates charged for out-of-network services for 2011-2014”; and “[a] spreadsheet
of co-payments and deductibles paid by the claimants.” The court further
ordered the parties to jointly report a mediation schedule by September 23.
      Oprex represents that it began to collect the required information, but
the process proved longer than anticipated. Therefore, it filed an unopposed
motion for a one-week extension, which the court granted. One week later,
Oprex provided Sonic with additional documents and information to satisfy the
court’s August 29 order. As with the last production, Oprex’s counsel stated in
his email, “if you have any questions about the calculation methods, or if you
need anything, I’m in the office all day today[.]” Sonic’s counsel responded,
“Thanks, I will review.”
      Oprex then initiated the process of selecting mediators to propose for the
upcoming joint mediation report (for which the court had also granted an
extension to September 30) and counsel emailed a list of possible mediators on
September 28.     In his reply, Sonic’s counsel expressed, for the first time,
“concerns about the discovery responses your client has provided, including
your charge information pursuant to Judge Hughes’ order.”                Rather than
explain more fully what those concerns were, counsel stated, “We believe
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                                  No. 16-20734
another status conference is needed. Please let me know if your client will
oppose our request for a status conference.” In the joint mediation report that
Sonic later filed, it provided the name of the mediator the parties agreed upon
and requested another status conference:
      [Sonic] would like another status conference with the Court to
      discuss the status of discovery in this matter prior to committing
      to mediation dates. [Oprex] feels it has satisfied the document
      request put forward in the previous court order, and thus there is
      no need for another status conference with the Court. Counsel for
      Sonic cannot be available October 6, 18-20, 2016, but can otherwise
      make himself available for such a status conference.
      The court scheduled a telephone conference on October 4. One hour
before the conference, Sonic submitted a “Supplemental Status Conference
Memorandum,” in which it detailed the ways that it believed Oprex’s
production inadequately responded to the court’s August 29 order. Among
other things, it represented to the court that Oprex “offer[ed] no specifics as to
any algorithms or formulas used to establish Oprex’s charges” during the
relevant period. In the very next sentence, however, Sonic stated that Oprex
explained in an email that it had based its rates on those Medicare set for the
same service and generally multiplied those rates by 12.5. In the referenced
email, Oprex’s counsel further said that Oprex had looked at other similarly
situated facilities in Oprex’s region and determined they were charging up to
15 times Medicare’s rate. Sonic complained to the court that Oprex gave no
explanation for how they settled on “12.5 times Medicare,” nor specified which
other facilities were allegedly charging 15 times Medicare’s rate. Sonic further
objected that Oprex did not provide any analysis of what it or other out-of-
network facilities were receiving in reimbursements.           It concluded by
requesting the court’s intervention to compel Oprex to comply with the court’s
orders and its discovery obligations and further requested appropriate
sanctions for Oprex’s “continued noncompliance.”
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                                 No. 16-20734
      At the conference, Oprex attempted to explain how it arrived at the “12.5
times Medicare” algorithm.      Apropos to Sonic’s memorandum, the court
expressed dissatisfaction that Oprex had not provided the list of comparator
institutions that it had surveyed in arriving at its rate, although—as Oprex
justifiably protests—this information was not clearly within the scope of the
court’s order to provide “[t]he program and algorithm [Oprex] used to set
billable rates charged for out-of-network services for 2011-2014.” Nonetheless,
the court stated, “I am prepared to strike the complaint and dismiss it.”
Oprex’s counsel attempted to respond; however, the court cut him off and
invited Sonic to offer its views on the matter. Unsurprisingly, Sonic agreed
that dismissal would be an appropriate sanction. Thereafter, and without
providing Oprex an opportunity to respond, the court declared, “the complaint
will be dismissed and judgment --”
      At this point, Oprex’s counsel interjected, “Your honor, if I may. We --
as somebody who has taken over this case from those individuals that you have
named [referring to Oprex’s prior counsel in the matter], I have done my
utmost and in my best faith to comply with all the Court orders.” The court
was unsympathetic. It stated, “you have not complied” and “there is a point at
which the recalcitrance reveals severe defect in the client.” Oprex’s counsel
beseeched the court for another week to procure the desired information, but
to no avail.
      That same day, the court entered its dismissal order.               Oprex
subsequently filed a motion for relief from judgment or alternatively for new
trial, which the court denied in a one-sentence order. Oprex timely appealed.
      This is the record before us. And Sonic disputes none of it. Whether or
not Oprex’s discovery responses could have been more fulsome, we fail to see
how its responses constitute “noncompliance” with the court’s orders.
Moreover, there is no indication in the record that Oprex sought willfully or in
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                                       No. 16-20734
bad faith to defy the orders, nor is there any hint in the record of “delay or
contumacious conduct,” Conner, 20 F.3d at 1380. The fact is, Sonic raised no
complaint, in a motion to compel or otherwise, regarding the adequacy of
Oprex’s responses until one hour before the conference.
       Nor do we have enough facts to determine whether the alleged
deficiencies in Oprex’s responses are attributable solely to Oprex, instead of its
attorney, who apparently had only recently taken over the case.                        As for
prejudice, Sonic does not attempt to elucidate with law or facts how its ability
to put on a defense was substantially undermined by Oprex’s discovery
responses, relying instead on block quotes from the October 4 conference. It
adds that it was prejudiced by incurring the time and expense of having
counsel travel twice to Houston and participate in a third conference by phone.
Oprex replies that such is not the prejudice required under the Conner factors,
which contemplate only prejudice to “the opposing party’s preparation for
trial,” U.S. v. $49,000 Currency, 330 F.3d 371, 376 (5th Cir. 2003). We agree.
       Finally, there is no indication that the court considered lesser sanctions
before ordering dismissal with prejudice, a most severe sanction that we have
deemed to be a “remedy of last resort,” Batson, 765 F.2d at 515. Although we
have stated that a district court is not required to impose “incrementally
increasing sanctions” before dismissing a party’s case, Moore, 735 F.3d at 317,
given the important due process concerns implicated by a dismissal with
prejudice, the court should at least consider the efficacy of lesser sanctions
first, Conner, 20 F.3d at 1380. 3 Furthermore, we are troubled by the district



       3 Relying on Moore, 735 F.3d at 317, Sonic argues that the district court specifically
warned Oprex that its case would be dismissed by stating at the August 29 conference that
if Oprex did not produce, “they lose. It’s real easy.” Moore is distinguishable from this case.
There, the court’s discovery order stated: “Plaintiffs who are found to have violated this
Court’s Order to preserve their notes and/or documents, will have their claims dismissed.”
Id. at 316. Here, no such explicit warning was provided, and certainly not in an order
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                                       No. 16-20734
court’s failure to provide any meaningful opportunity to Oprex to be heard
regarding Sonic’s discovery concerns. 4
       On the record before us, we are constrained to conclude that the district
court’s dismissal sanction falls well outside the bounds of its broad discretion
in adjudicating discovery matters. See Conner, 20 F.3d at 1382; Batson, 765
F.2d at 516; Marshall, 621 F.2d at 769.
       REVERSED and REMANDED for further proceedings consistent with
this opinion.




pursuant to Rule 37(a)—“the notice required to effectively warn a party before [Rule] 37(b)
sanctions can be imposed,” Segona, 621 F.2d at 766 n.2.

       4 We note that there are only 23 lines in the hearing transcript between the court’s
statement that it was “prepared to strike the complaint and dismiss it,” and its statement
that “the complaint will be dismissed.” Moreover, in those 23 lines, the court prevented Oprex
from responding, while asking, instead, for Sonic’s views on the propriety of dismissing the
case against it.
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