U.S. Magistrate Judge Gary R. Brown of the Eastern District of New York, citing “startling findings” of “reprehensible gamesmanship by a professional engineering company that unjustly frustrated efforts by two homeowners to get fair consideration of their claim” following Superstorm Sandy – and evidence that “these unprincipled practices may be widespread,” and may have similarly affected “hundreds” and “possibly more” Sandy flood insurance claims – has sanctioned an insurer and its counsel, and has significantly broadened discovery in all Sandy cases in the district.

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Specifically, Magistrate Brown stated in his memorandum andorder that the “evidence adduced in this matter” demonstrated thatU.S. Forensic, an engineering firm retained by Wright NationalFlood Insurance Company to examine a storm-battered house in LongBeach, New York:

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unfairly thwarted reasonedconsideration of plaintiffs' claim through the issuance of abaseless report. The engineer sent by U.S. Forensic opined in awritten report that the home at issue had been damaged beyondrepair by Hurricane Sandy. A second engineer, who did little morethan review the photographs taken by the inspecting engineer,secretly rewrote the report, reversing its conclusion to indicatethat the house had not been damaged by the storm, and attributing –without sufficient evidence – defects in the home to long-termdeterioration. This process, euphemistically dubbed a “peer review”by U.S. Forensic, was concealed by design from the homeowners,remained uncovered during the Court-assisted discovery process andcame to light through near happenstance. In a misguided attempt todefend these flawed practices, [Wright] has elicited evidence thatthis “peer review” process may have affected hundreds of HurricaneSandy flood insurance claims – and possibly more.

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In his decision, Magistrate Judge Brown addressed the evidencepresented, made findings, and directed certain relief “toameliorate the highly-improper practices brought to light in thiscase.”

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The Case

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Plaintiffs Deborah Raimey and Larry Raisfeld were the owners ofa property located at 24 Michigan Street in Long Beach, New York,which was located about one block from the beach. The plaintiffslived and resided in an adjacent home and purchased the house at 24Michigan Street with plans to ultimately expand their own home.After Sandy struck, one of the plaintiffs observed significantdamage to the house that did not exist prior to the storm,including extensive damage to the floors, which had shifted in thestorm.

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An independent adjustor examined the home and Wright paid theplaintiffs slightly more than $60,000 (in several installments) forcosmetic, non-structural damage. The adjustor also prepared adocument entitled “Engineer Request for Fidelity,” in which he madethe following observations:

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During a recent flood inspection, Inoticed the flooring in the dwelling was uneven from the front tothe rear. The floor seemed to have a “rolling action” as you walkedover it. A visual inspection of the flooring at several of thewalls, appeared to have dropped about a [sic] inch or two in somecases. There was a 5 inch difference between the ceiling height atthe corner of the bedroom and the center line of the bedroom. Theexterior of the building had about 3ft of sand adjacent to thebuilding. An inspection of the building crawl space showed severalframing members out of line. A visual inspection of the front ofthe roof showed unevenness along the roof line. At thecurrent time, the building appears to be unsafe to livein.

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(Emphasis added.)

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Magistrate Judge Brown said that U.S. Forensic sent GeorgeHernemar, a licensed engineer, to conduct an inspection of theproperty. Magistrate Judge Brown found that Mr. Hernemar, who hadbeen trained in Sweden, obtained employment as a contractor withU.S. Forensic, a nationwide engineering firm, after answering an adon Craigslist for a New York licensed engineer, and that heconducted approximately 50 home inspections for U.S. Forensic toassess damage inflicted by Superstorm Sandy. (U.S. Forensic hadbeen engaged by Wright's predecessor in interest to report on thedamage to the 24 Michigan Street property.)

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Magistrate Judge Brown found that, following his inspection, Mr.Hernemar wrote and transmitted a report dated December 9, 2012 (the“December 9 report”) containing his findings to U.S. Forensic.Magistrate Judge Brown found that the December 9 report, whichcontained “numerous pages of text and photographs,” offered thefollowing “Results and Conclusions”:

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1) The physical evidence observed atthe property indicated that the subject building wasstructural [sic] damaged by hydrodynamic forces associatedwith the flood event of October 29, 2012. The hydrodynamic forcesappear to have caused the foundation walls around the south-westcorner of the building to collapse.

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2) The extent of the overall damagesof the building, its needed scope of repair combined with the ageof the building and its simple structure, leads us to conclude thata repair of the building is not economicallyviable.

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(Emphasis added.)

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Magistrate Judge Brown found that the plaintiffs “never receivedthis report from their insurance carrier.” Rather, Magistrate JudgeBrown found, they received a report dated January 7, 2013 (the“January 7 report”) which contained “completely divergent 'Resultsand Conclusions'”:

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1) The physical evidence observed atthe property indicated that the subject building was notstructurally damaged by hydrodynamic forces, hydrostaticforces, scour or erosion of the supporting soils, or buoyancyforces of the floodwaters associated with the subject floodevent.

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2) The physical evidence observed atthe subject property indicated that the uneven roof slopes,leaning exterior walls and the uneven floor surfaces within theinterior of the building, were the result of long termdifferential movement of the building and foundation thatwas caused by long-term differential movement of thesupporting soils at the site and long-term deflection of thebuilding framing.

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(Emphasis added.)

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Magistrate Judge Brown found that, based on the January 7report, Wright refused to pay for any structural damage to theplaintiffs' home.

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Litigation ensued and, following the failure of mediation toresolve the dispute, the plaintiffs' counsel filed a “Motion to SetDiscovery Schedule and Set for Trial,” informing the court, for thefirst time, that it had evidence of a U.S. Forensic engineeringreport that provided a conclusion contrary to the report upon whichWright had based its denial of much of the plaintiffs' floodinsurance claim.

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Magistrate Judge Brown explained that, in response, Wright,among other things, denied all knowledge of the seemingly alteredreport, blamed the plaintiffs for failing to provide evidence ofthe earlier report prior to mediation, sought to select a differentexpert as “this engineer and U.S. Forensics [sic] are now allegedlytainted,” and demanded that the plaintiffs provide all informationconcerning the discrepancies in the engineering reports to the newengineer.

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On October 1, 2014, Magistrate Judge Brown issued the followingorder:

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In light of the nature of theallegations set forth in plaintiffs' submission and defendant'sresponse thereto, a hearing shall be conducted before theundersigned … At that hearing, plaintiffs shall be prepared topresent testimony and documentary evidence concerning theallegations relating to U.S. Forensic Report No. 12.22.1304 and thevarious incarnations of that report referenced in the parties'submissions. Counsel for the parties will ensure that Mr. GeorgeHernemar will be present in person to testify about the preparationand submission of the report and related matters. Counsel fordefendants will also produce any other necessary witnesses toexplain, as appropriate, any differences between the purportedoriginal report and the report ultimately produced indiscovery.

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Magistrate Judge Brown held an evidentiary hearing on October16, 2014, at which the parties produced three witnesses. MagistrateJudge Brown explained that, at the hearing, Mr. Hernemar and asecond witness explained that the “radical changes” in his reportresulted from a “peer review process.” Magistrate Judge Brown saidthat Mr. Hernemar testified that he “wrote both of these reports”and insisted that no one had made any alterations or changes to thereports. Magistrate Judge Brown said that he testified that he had“an open discussion” on the telephone with a U.S. Forensicengineer, who pointed out that “the draft was based onassumptions.” As a result, Mr. Hernemar “issue[d] a report changing[his] opinions.” Magistrate Judge Brown stated that although thetestimony of Mr. Hernemar “was, at times, confused,” he testifiedunequivocally that, “I rewrote my report.”

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Magistrate Judge Brown stated that after Mr. Hernemar testified,counsel for Wright “attempted to end the hearing, foreclosingfurther inquiry on this subject”:

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MR. MARTINE: Judge, I think thepurpose of this hearing was to determine whether we should havesome discovery; in essence, whether or not something untoward wasgoing on between U.S. Forensic and perhaps Mr. Hernemar.

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THE COURT: Are you under theimpression that the result of the hearing so far gives us a clearanswer to that?

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MR. MARTINE: Yes, Judge….

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THE COURT: You brought a witness whois going to talk about the peer review process. Right?

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MR. MARTINE: I don't think I need tocall him, Judge.

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Magistrate Judge Brown noted that the plaintiffs' counsel andMagistrate Judge Brown disagreed. Magistrate Judge Brown statedthat, after a lunch recess, “counsel for [Wright] tried again”:

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MR. MARTINE: Judge, my feeling isthat, based on the testimony this morning and based on the reasonfor this hearing, the hearing is resolved. The witness clearlytestified that those were his opinions adopted by him following apeer review process; that he wasn't required, he wasn't compelled,he wasn't really told to do anything. He adopted the opinions.

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Magistrate Judge Brown pointed out that counsel for Wright“acknowledged that he was aware of the information to which MichaelGarove, the 'peer review' engineer, would testify”:

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And I can tell you what Mr. Garovewill testify, and this is a representation to the court, is that,yes, he was the peer reviewer for the original report, the roughreport of December, that his peer review, basically his peerreview, he made suggestions and that the two engineers consultabout the suggestions and that Mr. Hernemar could adopt or denyevery single suggestion made and then the report is finalized. Andthat is the extent of the testimony concerning the peer review,Judge.

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Magistrate Judge Brown explained that, notwithstanding counsel'srepresentation, counsel for the plaintiffs requested that Mr.Garove be permitted to testify, which application was granted.

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Magistrate Judge Brown explained that Mr. Garove testifiedthat:

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- he was an engineer licensed in Louisiana and New York, havingobtained the latter license in 2011, who has worked for U.S.Forensic for approximately four and a half years;

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- he did not, at any time, inspect the 24 Michigan Street home or anyportion of the property, and was unsure whether he had inspectedany of the surrounding homes;

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- he was assigned to review the December 9 report authored by Mr.Hernemar; and

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- he received an email assigning him review of that report, “mostlikely from Gary Bell,” Managing Partner of U.S. Forensic.

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Magistrate Judge Brown staid that Mr. Garove provided thefollowing description of U.S. Forensic's “peer review” process:

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The peer review process, when wereceive the initial document it is a draft form … Meaning, it isnot a final version.

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And within Microsoft Word, which is asoftware program that we all should be familiar with, there is atab in there, a process by which you can initiate a tracking of anytype of markups, changes, comments, whatever you would like to doin that report …

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So … the peer review process involvesreviewing the contents of the report, both technically,grammatically, you know, the entire content of the report, as wellas reviewing any other drawings, photographs, or any otherinformation that the inspecting engineer would produce or provideto us. From that information … we basically evaluate as a peer, asan engineer, the validity of what is being stated … and then make afinal determination about whether or not the conclusions that areincluded within the report are accurate or in line with, you know,engineering knowledge.

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[O]nce that's done, this copy of thisreport, which has everything that you do as a peer reviewer, isthen tracked and documented, so it is not hidden, is submitted backto the office and/or the engineer, inspecting engineer, for theirreview to determine whether or not they feel as though any changes,comments, markups or anything are correct or in line with theiropinion.

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And then at that point there is anopportunity, even again within that same software program, toeither individually accept or deny any changes that you make oralterations….

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Magistrate Judge Brown then found that, “rather than the 'opendiscussion' described by [Mr.] Hernemar, [Mr.] Garove described aprocess by which the report authored by the inspecting engineer wasrewritten by an engineer who had not inspected theproperty and whose identity remained concealed from the homeowner,the insurer and, ultimately, the Court. [Mr.] Garove acknowledgedthat he revised the December 9 report, sent what became the finalreport to [Mr.] Hernemar and, remarkably, stated that the two hadno further discussion or contact in the matter…. Instead, itappears that [Mr.] Hernemar 'adopt[ed Mr. Garove's] conclusionscompletely.'”

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Magistrate Judge Brown found that Mr. Garove “endeavored tominimize the changes he made in this report,” testifying that “inthis case a lot of stuff just got moved around, it gotrestructured, because the grammar was not correct or it wasn't inthe proper place in the document.” Magistrate Judge Brown statedthat:

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In truth, [Mr.] Garove reversed theconclusion of the inspecting engineer, and removed many pertinentobservations which were inconsistent with [Mr.] Garove'sconclusions. And, despite repeatedly asserting that he had neverread the January 7 report, in response to a question bythe Court, [Mr.] Garove conceded that he, in fact, wrotethe January 7 report.

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Magistrate Judge Brown stated that, in his declaration, Mr.Garove had “the temerity to assert the following”:

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Visual observations from an inspectingengineer during a site visit are not necessarily as informative asa review of photographs of the property after the site visitbecause review of quality photographs by an experiencedpeer-reviewer can yield more accurate analysis and results thandirect visual observation of conditions by an inspecting engineerwith less experience and understanding of the subject.

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Magistrate Judge Brown stated:

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The thought is, then, that [Mr.]Garove, sitting in a remote location and never seeing the subjectproperty, can do a better job than a licensed engineer sent to thescene. This assertion begs the question of why U.S. Forensic wouldnot simply send a photographer to homes to be inspected, andproduce purportedly superior reports at lower cost by having aremote engineer review the resulting photographs. It also raisesthe issue of why [Mr.] Garove did not sign the subject report,since he is the one who actually performed the analysis.

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Magistrate Judge Brown found that Mr. Garove's assertions were“undermined by the substance of the report, which provides thereader, in uncertain terms, with assurances that this report isbased upon a physical inspection of the property by, and relyingupon the expertise of, [Mr.] Hernemar, the inspecting engineer.”Magistrate Judge Brown added that the January 7 report listed Mr.Hernemar as the “Engineer of Record,” “while making no mention of[Mr.] Garove, any other contributor, or any peer review process.”Magistrate Judge Brown then stated:

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The report's conclusions are expresslypremised upon “[t]he physical evidence observed at the property,”and states that “our work to complete this assignment was performedby George Hernemar, P.E.” … A substantial portion of the report isdevoted to “Site Observations,” and makes repeated references tosuch observations. See, e.g., … (“No … evidence of recentshifting … was observed beneath the building”); … (“We observed noevidence or indication …”); … (“but no evidence or any recentshifting … was observed.”). Taken together, these statementsconcerning the methodology employed and the information relied uponrender the report misleading.

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Moreover, the changes wrought by [Mr.]Garove on [Mr.] Hernemar's work journeyed beyond misleading intothe realm of misrepresentation. In the December 9 report, [Mr.]Hernemar noted that a deposit of sand prevented him from examiningthe foundation to determine whether it had collapsed, and wouldhave to be removed before a “definite determination” could bereached…. As counsel for Wright elicited in cross-examination of[Mr.] Hernemar, limited access to the crawlspace similarlycircumscribed the inspection…. [Mr.] Hernemar's conclusion that thefoundation of the house had collapsed was, in part, anextrapolation from his examination of a neighboring house – thefoundation of which was visible – and which, he believed, had beensubject to similar hydrostatic forces during the storm.

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Magistrate Judge Brown added that:

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[N]otwithstanding the fact that thefoundation walls could not be seen or photographed, [Mr.] Garovemodified the report not only to remove this limitation, but torepeatedly and conclusively state that “no evidence” was observedof damage to the foundation components…. In other words, thelimitations of [Mr.] Hernemar's observations and his subsequentextrapolation may have justified amending the report to make itinconclusive. Instead, under the guise of “peer review,” [Mr.]Garove transformed the report to indicate a conclusiveabsence of storm damage. A similar issue arises withrespect to [Mr.] Garove's “observations” relating to thecrawlspace. [Mr.] Hernemar testified that he had extremely limitedaccess to the crawlspace and the three supplied photographs of thecrawlspace area depict a very narrow view. Nevertheless, [Mr.]Garove introduced specific observations about the crawlspace intothe report that appear entirely unsupported by [Mr.] Hernemar'sreport and the accompanying photographs.

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Next, Magistrate Judge Brown stated, in addition to changes, Mr.Garove included the following “comment” addressed to Mr. Hernemarin the redline draft:

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George:

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Please note the changes/commentswithin the report. Please noted [sic] that we don't theorize aboutdamages. We observe, inspect and report damages to the building. Inthis case, we did not observed [sic.] any damagefrom hydrostatic, hydrodynamic, buoyancy forces or scour or erosionof support soils that caused damage to the subject building orfoundation.

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Please finalize this reportand send to Donna for issue.

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Michael P. Garove, P.E.

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Partner

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(Emphasis added.)

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Magistrate Judge stated that, “[u]nsurprisingly, [Mr.] Hernemaraccepted all of [Mr.] Garove's changes and had the document issuedas instructed.” Magistrate Judge Brown added:

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Notwithstanding the vehementassertions of Wright's counsel, [Mr.] Hernemar's acquiesce to thisbaseless reversal of the report's conclusion and alteration of theobservations does little to validate this unprincipled process.

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According to Magistrate Judge Brown, the “peer review” process“extended beyond this one example.” Magistrate Judge Browndeclared:

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In this very case, as noted elsewhere,[Mr.] Hernemar described a peer review of his supplemental reportthat resulted, again, in a change to his ultimate conclusionconcerning foundation damage upon reinspection…. Furthermore, [Mr.]Hernemar stated that – in his rough estimation – he completed fiftyHurricane Sandy inspections for U.S. Forensic, and that in four orfive instances, extensive changes were wrought as a result ofso-called peer review…. This process was limited neither to thisone engineer, nor specifically to U.S. Forensic.

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Magistrate Judge Brown explained that, on December 31, 2012 –after Mr. Hernemar's initial inspection but prior to the release ofthe January 7 report – an inspector from the City of Long Beachexamined the structure. As a result of that inspection, the cityprovided the plaintiffs with a “substantial damage letter” datedJanuary 3, 2013 that indicated that the house “received damages of[63.4 percent] of the value of the predamaged structure as a resultof the flooding that occurred on October 29, 2012.” MagistrateJudge Brown stated that, based on that finding, the city advisedthe plaintiffs that the house “must either be removed … or have thelowest floor … elevated to at or above the 100-year floodelevation.” In supporting documents, the inspector calculated areplacement cost of $269,850 and an “actual cash value” of$204,546.30 for the house.

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Magistrate Judge Brown said that, upon receipt of the January 7report, “which ran counter to all of the other information receivedby the plaintiffs,” they began contacting Wright, seeking a secondinspection by a different engineer. After “several dozen telephonecalls” to Wright, “Wright relented, apparently asking U.S. Forensicto again inspect the property.”

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According to Magistrate Judge Brown, on January 25, 2013, U.S.Forensic sent Mr. Hernemar to conduct a reinspection, and duringthis visit, the plaintiffs viewed and photographed the cover andconclusion pages of Mr. Hernemar's December 9 report. MagistrateJudge Brown stated that, as a result of the new examination, Mr.Hernemar uncovered a small amount of foundation damage to thehouse, for which Wright compensated the homeowners a total sum ofapproximately $11,000. Thus, Magistrate Judge Brown stated, thetotal paid by Wright on the file amounted to less than $80,000.

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Magistrate Judge Brown stated that given this “relatively smallinsurance recovery and the damage to the home which rendered ituninhabitable, plaintiffs could no longer rent the house. Withoutthe rental income, plaintiffs could not afford to continue payingthe mortgage and property taxes, so they sold the 24 MichiganStreet house for the value of the property. The house has sincebeen razed.”

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The Court's Decision

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In his decision, Magistrate Judge Brown first explored Wright'sdiscovery obligations.

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He explained that, in the Eastern District of New York, thecommittee of magistrate judges appointed to manage Superstorm Sandycases has effected an “expedited discovery process” through nearlya dozen case management orders (“CMOs”) and through “hundreds ofconferences.” He noted that CMO# 1, issued on February 21, 2014,directed defendants to produce:

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any documentation relating to anassessment of the claimed loss, including all loss reports anddamage assessments, adjuster's reports, engineering reports,contractor's reports, photographs taken of the damage or claimedlosses, and any other evaluations of the claim [and] all expertreports and/or written communications that contain any descriptionor analysis of the scope of loss or any defenses under thepolicy.

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Magistrate Judge Brown added that CMO#3 reiterated thisdirection:

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Liaison Counsel forwarded a questionfrom defense counsel to the Committee as to whether expert reportsare subject to production pursuant to the automatic discoveryprocess. It is hereby ordered that, to the extent that any suchreport was prepared prior to the issuance of this Order, suchreport must be produced immediately to opposing counsel. CMO# 1expressly provides that defendants are to provide “all expertreports and/or written communications that contain any descriptionor analysis of the scope of loss or any defenses under the policy.”CMO# 1 at 21. To be clear, any expert reports that have beenprepared are required to be produced under this provision,regardless of whether a party anticipates, at this time, presentingthe testimony of such expert. At the same time, CMO# 1 should notbe read as imposing an affirmative duty to create such a report,but if it exists, it should be produced.

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Magistrate Judge Brown stated that CMO# 3 addressed anypotential claims of privilege:

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Rule 26(b)(4)(D) provides that“[o]rdinarily, a party may not … discover facts known or opinionsheld by an expert who has been retained or specially employed byanother party in anticipation of litigation or to prepare for trialand who is not expected to be called as a witness at trial.”However, this privilege “may only be invoked when an expert hasbeen retained or specially employed because of the prospect oflitigation, and not in the normal course of business.” QBE Ins.Corp. v. Interstate Fire & Safety Equip. Co., Inc., 2011WL 692982 (D.Conn.2011) (rejecting application of rule to notes byclaims adjustor of conversations with experts); Fine v.Bellefonte Underwriters Ins. Co., 91 F.R.D. 420, 423(S.D.N.Y.1981)(reports producible unless “generation of the reportswere in furtherance of a sufficiently identifiable resolve tolitigate, rather than a more or less routine investigation of apossibly resistable claim on a first party insurer”); Tayler v.Travelers Ins. Co., 183 F.R.D. 67, 70 (N.D.N.Y.1998) (“wherethere is a disagreement between the property owner and theinsurance carrier as to the amount of the fire loss, the propertyowner/insured/plaintiff is entitled to discovery of thecarrier/defendant's file and depose adjusters”) (collectingcases).

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Magistrate Judge Brown stated that, since February 2014, Wright“has been under unequivocal and repeated Court direction to produceall expert reports, photographs and 'written communications thatcontain any description or analysis of the scope of loss or anydefenses under the policy.'” Yet, Magistrate Judge Brown added, Mr.Hernemar's:

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December 9 report, the redlinedocument that transformed that report into the January 7 report, aswell as a bevy of email communications surrounding the creation,transmission and modification of these documents – all of whichclearly fall within the ambit of CMO 1 and 3 – have never beenproduced.

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(Endnote omitted.)

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Magistrate Judge Brown rejected Wright's contention that the“so-called 'draft'” reports were privileged:

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Based upon the evidentiary hearing, Ifind that not only did Wright fail to demonstrate any legitimateneed to protect the documents at issue, but that plaintiffs haveoverwhelmingly demonstrated a need for disclosure. In light of theunorthodox methodology employed to generate reports that resultedin a denial of plaintiffs' insurance claim, permitting defendant towithhold these documents would constitute a serious injustice.

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Magistrate Judge Brown also found it “difficult to understand”how Wright's counsel could assert work product in good faith,explaining that because “counsel did not even appear in the matteruntil a year after their creation, the documents at issue simplycannot contain any mental impression of counsel, and were clearlynot prepared for the purposes of litigation.”

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Magistrate Judge Brown then rejected Wright's defense arisingfrom the fact that U.S. Forensic only provided the two so-calledfinal reports to Wright, which, in turn, disclosed those reports tothe plaintiffs. Magistrate Judge Brown stated that “counsel has aduty to conduct a 'reasonable inquiry' to ensure that discoveryresponses are 'complete and correct.'” He added that Wright'scounsel's argument seemed:

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to be limited to the fact that “[i]nthe Defendant's claims file, which was fully and timely produced,was an original report, and then a supplemental report.” … Thus,counsel's contention is that by producing its own file, Wrightsatisfied its discovery obligations and counsel discharged its dutyto perform a “reasonable inquiry” merely by asking Wright for thatfile.

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However, Magistrate Judge Brown ruled:

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Under the circumstances, this level ofinvestigation did not satisfy counsel's obligations. As this Courtrepeatedly directed the parties to produce all reports and writtencommunications, an investigation that failed to include an inquirywith the engineering firm is clearly insufficient under thecircumstances. This is particularly true where, as here, asdefendant's counsel well knew, plaintiffs were not permitted toseek discovery directly from U.S. Forensic, as such disclosure wasnot authorized under the CMOs, and there was a reasonable chancethat U.S. Forensic would prove to be defendant's expert attrial.

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In fact, one particular aspect ofdiscovery in this matter undermines defense counsel's claim thatprovision of the two reports in Wright's claims file effectivelydischarged its obligations under this Court's discovery orders.Among the items ordered produced in CMO 1 were “all … photographstaken of the damage or claimed losses.” … [Mr.] Hernemar testifiedthat while he attached approximately twenty photographs of theproperty which were included as part of his December 9 (andultimately January 7) reports, he took more than fifty photographswhich were supplied to U.S. Forensic. The January 7 report, whichbecame part of Wright's claims file and was produced, notesthat:

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Representative photographs are in theattachments. The photographs taken but not included in the reportare available upon request.

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…

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Thus, in order to comply with thisCourt's directive that all photographs be provided, defendant wouldnecessarily have had to contact U.S. Forensic to obtain theadditional but unsupplied photographs expressly identified in thereport. Thus, counsel's limitation of its discovery inquiry toWright's claims file was a clear violation of its discoveryobligations.

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Magistrate Judge Brown found that “after receiving evidence thatthe engineers report apparently had been altered, counsel forWright initially did little to investigate the matter.” Next,“counsel for Wright endeavored to prematurely circumscribe thehearing, which would have left the Court and plaintiffs with adistinct misimpression of the practices employed by U.S. Forensic.”And lastly, “even after the hearing, Wright attempted to defend theindefensible practices exposed here.”

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Magistrate Judge Brown then ruled:

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I find that counsel for Wrightviolated its obligations to comply with this Court's discoveryorders, thereby unreasonably prolonging this litigation, imposingunnecessary costs upon plaintiffs and further contributing to theunwarranted delays in resolving this claim.

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(Endnote omitted.)

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The Remedies

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Magistrate Judge Brown found that the “major effect of thereprehensible practices uncovered here – as well as counsel'sfailure to disclose these practices at an earlier juncture – was tounnecessarily complicate and delay this action.” He added that the“context” remained important: according to the City of Long Beach,the losses totaled approximately $205,000, while the testimony attrial suggested that the insurer already had paid out about$80,000. Thus, Magistrate Judge Brown stated, “based on these roughfigures, the most that could be at issue here amounted toapproximately $125,000 and, based on the coverage limits of$250,000, no more than about $170,000 could be at stake.” Headded:

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To a government-backed insurer, theseare trifling figures, and in the world of federal cases, suchfigures are unimpressive, particularly when compared to theexorbitant costs of litigation. On the other hand, to individualhomeowners, these are staggeringly large sums. The violations inthis case resulted in many months of delay for plaintiffs, and,unnecessarily, a full day evidentiary hearing and numerous briefsto fully explore these issues.

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That ends now.

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Magistrate Judge Brown then stated:

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I hereby prohibit defendant Wrightfrom supporting its defenses or opposing plaintiffs' claims withany expert testimony other than that of [Mr.] Hernemar, and theymay not produce, rely upon or create any expert reports other thanthose already produced. Defendant's application to obtain yetanother expert to examine plaintiffs' claim (and its directive toplaintiff to help prepare that expert) is hereby denied. While amore significant sanction – such as striking the answer or evencontempt – might be warranted on these facts, I find that thissanction constitutes a just order, which is intended to expeditethis matter and avoid further unneeded complications in thiscase.

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Magistrate Judge Brown then ruled:

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Because counsel for plaintiff withheldinformation relating to the apparent discrepancy in reports untilthe mediation, no monetary sanction is appropriate for the periodleading up to the mediation. However, given discovery failures bydefendant's counsel, the unreasonable response by defendant to theallegations, and counsel's shocking attempt to curtail inquiryduring the hearing, it is reasonable to charge the costs associatedwith the hearing to defendant's counsel. Plaintiffs' counsel,therefore, may make application for reimbursement from defendant'scounsel for all reasonable costs associated with the motion, thehearing and all related briefing, including attorneys' fees, travelcosts and transcription costs, within thirty days of the date ofthis Order.

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Next, Magistrate Judge Brown ruled:

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As a result of the startling findingscontained herein, plaintiffs in this case, as well as all otherHurricane Sandy cases, must be provided with additional discoveryto determine whether there are other expert reports, drafts,photographs and email communications that have not been disclosedto date.

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Therefore, as an “initial response,” Magistrate Judge Brownstated:

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I am directing that – within thirtydays of the date of this Order – all defendants in any HurricaneSandy case provide plaintiffs with copies of all reportsdescribed in CMO# 1 – plus any drafts, redlines, markups,reports, notes, measurements, photographs and writtencommunications related thereto – prepared, collected or takenby any engineer, adjustor or other agent or contractor affiliatedwith any defendant, relating to the properties and damage at issuein each and every case, whether such documents are in thepossession of defendant or any third party. Such productionshould provide counsel with sufficient information to proceed tomediation and/or settlement and, where necessary, trials in thesecases. Furthermore, upon receipt of such information, counsel forplaintiffs may make application for further discovery asappropriate and consistent with the principles set forth in thisdecision. Obviously, it would behoove defendants in all cases to beas forthcoming as possible at this juncture.

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The case is In re Hurricane Sandy Cases (Deborah Raimey andLarry Raisfeld v. Wright National Flood Ins. Co.), No. 14 MC41. | No. 14 CV 461(JFB)(SIL)(GRB) (E.D.N.Y. Nov. 7, 2014).Attorneys involved include: Mostyn Law, Houston, TX, By: SteveMostyn, Esq., Rene M. Sigman, Esq., Denis G. Kelly &Associates, P.C., Long Beach, NY, By: Denis G. Kelly, Esq.,Gauthier, Houghtaling & Williams, LLP, Metairie, LA, By:Frederick W. Bradley, Esq., James M. Williams, Esq., for thePlaintiff; Nielsen, Carter & Treas, LLC, Metairie, LA, By:Gerald J. Nielsen, Esq., Kristina J. Fonte, Esq., McMahon Martine& Gallagher LLP, New York, NY, By: Anthony Martine, Esq.,Patrick W. Brophy, Esq ., Timothy D. Gallagher, Esq., For Non–PartyU.S. Forensic; The Demmons Law Firm, Metairie, LA, By: LarryDemmons, Esq., for the Defendant.