No Third Chances: Imputing Counsel’s Willful Discovery Misconduct to Corporate Clients – A Commentary on Bilodeau v. Usinage Berthold, Inc.

1. Introduction

On 27 June 2025, the United States Court of Appeals for the Second Circuit issued a Summary Order in Bilodeau v. Usinage Berthold, Inc., affirming a $12,082,743 default judgment entered by the U.S. District Court for the District of Vermont as a discovery sanction under Federal Rule of Civil Procedure 37. The litigation arose from the death of Matthew Bilodeau, allegedly caused by the collapse of an air jack manufactured by the defendant. After nearly two years of discovery abuses—including failure to serve initial disclosures, disregard of multiple court orders, and the appearance of unadmitted counsel—the district court entered default judgment on liability and later set damages. The defendants’ perfunctory Rule 55/60 motion to vacate was denied, and the Second Circuit affirmed.

Although issued as a non-precedential Summary Order, the decision provides a lucid synthesis of the Second Circuit’s approach to:

Determining willfulness and bad faith in discovery violations,
Imputing counsel’s misconduct to corporate clients,
Evaluating the adequacy of lesser sanctions, and
Assessing motions to vacate default judgments under Rules 55(c) and 60(b).

2. Summary of the Judgment

The Circuit held that the district court did not abuse its discretion in:

Entering default judgment as a Rule 37(b)(2)(A)(vi) sanction after explicit warnings and continued non-compliance;
Finding the defendants’ behavior “willful” and concluding lesser sanctions would be ineffective;
Denying the motion to vacate because the defendants failed to show excusable neglect or a meritorious defense, and because vacatur would severely prejudice the plaintiff.

Key features of the appellate analysis included:

Application of the familiar four-factor Agiwal test to uphold the discovery sanction;
Reliance on S.E.C. v. McNulty to impute willful misconduct of counsel to the corporate client;
Use of the three-factor Guggenheim Capital test to affirm denial of vacatur.

3. Analysis

3.1 Precedents Cited and Their Influence

Kyros Law P.C. v. World Wrestling Ent., Inc. (2023) – Reaffirmed the “abuse of discretion” standard for reviewing Rule 37 sanctions. Bilodeau leans on Kyros to stress appellate deference.
Guggenheim Capital, LLC v. Birnbaum (2013) – Provides the framework for reviewing default-judgment sanctions and motions to vacate. The Second Circuit borrowed the notice requirement and the three-pronged test (willfulness, meritorious defense, prejudice) from Guggenheim.
Agiwal v. Mid Island Mortgage Corp. (2009) – Supplies the four factors for evaluating discovery sanctions, directly quoted and applied by the panel.
S.E.C. v. McNulty (1998) – Establishes that a corporation cannot escape default by blaming counsel where it failed to monitor counsel’s acts. The court heavily relied on McNulty to impute counsel’s willfulness to Usinage.
Bricklayers & Allied Craftworkers Local 2 v. Moulton Masonry (2015) – Cited to reject the conclusory “meritorious defense” argument; the moving party must present a complete defense.
Grace v. Bank Leumi Trust Co. (2006) – Invoked to explain that if counsel were removed, an unrepresented corporation would still be subject to default.

3.2 Legal Reasoning

The appellate court’s reasoning unfolds in two strands:

Affirming the Default Judgment
Applying Agiwal, the court found:
- Willfulness: Two years of non-compliance, ignoring initial disclosures, failing to secure admitted counsel, and attending hearings without producing discovery.
- Inefficacy of Lesser Sanctions: Multiple warnings, extensions, and the threat of sanctions did not yield compliance.
- Duration: Non-compliance spanned from the initial disclosure deadline (Aug 2022) through the July 2024 show-cause hearing.
- Notice: Written orders and oral warnings (with a corporate representative present) highlighted default as the likely consequence.
Denial of the Motion to Vacate
Under Guggenheim:
- Willful Default: Assertions about missed emails or ignorance could not override the documented history.
- No Meritorious Defense: Defendants’ three-sentence denial of product defect was deemed woefully insufficient under Bricklayers.
- Prejudice: Plaintiff faced extensive delay and expense; reopening discovery would compound the prejudice.

3.3 Impact on Future Litigation

While designated non-precedential, the ruling carries persuasive force and signals several practical realities in the Second Circuit:

Sharp Teeth of Rule 37(b): Courts will not hesitate to deploy default judgment when discovery orders are flouted repeatedly.
Corporate Oversight Obligation: A corporate party must actively supervise counsel. Failure to do so invites imputation of counsel’s misconduct.
“No Third Chances” Standard: Litigants should not expect endless opportunities; explicit warnings coupled with one final opportunity may suffice.
Motions to Vacate Require Substance: Bare accusations or perfunctory filings will not satisfy Rule 55 or 60 burdens.
Local-counsel and Admission Rules Matter: Non-compliance with pro hac vice and local-counsel requirements may escalate sanctions.

4. Complex Concepts Simplified

Rule 37 Sanctions: Allows a judge to penalize parties who disobey discovery orders. Penalties range from fee-shifting to dismissing claims or entering default.
Default Judgment: A binding judgment entered against a party that fails to defend or comply, treating the allegations as admitted.
Willfulness vs. Negligence: “Willful” misconduct involves conscious or reckless disregard of court orders, not merely oversight.
Rule 55(c) and Rule 60(b): Provide mechanisms to set aside defaults and judgments, but require showing good cause, meritorious defense, and lack of prejudice.
Pro hac vice Admission: Permission for an out-of-state lawyer to appear in a specific case; failure to secure admission can hamper representation.
Diversity Jurisdiction: Federal jurisdiction when litigants are from different states/countries and the amount in controversy exceeds $75,000.

5. Conclusion

Bilodeau v. Usinage Berthold, Inc. underscores the Second Circuit’s intolerance for persistent discovery abuse and reaffirms that corporate litigants bear the risk of their counsel’s failures. The decision clarifies that after explicit warnings and opportunities, courts may impose the “ultimate” sanction— default judgment—without running afoul of appellate review. Equally important, it cautions that motions to vacate must present concrete, evidentiary support for excusable neglect and viable defenses; mere finger-pointing at counsel or vague denials will not suffice. Although technically non-precedential, the ruling offers persuasive guidance that parties in federal court should heed: monitor counsel diligently, respect discovery obligations, and respond substantively to court orders—or face the finality of a “no third chances” default judgment.