## Facts

- Kenneth Nelson sued his former business partners, Bruce Schultz and Jon Rodgers, in federal court, asserting a breach-of-contract claim arising out of their prior business relationship.
- Nelson sought damages that put his personal finances at issue, including claims tied to his income and financial loss.
- During discovery, Schultz and Rodgers requested Nelson’s federal income tax returns to test Nelson’s damages assertions and related financial contentions.
- The district court issued discovery orders directing Nelson to produce the requested tax returns.
- Nelson repeatedly failed to comply with those discovery orders and missed court-imposed deadlines.
- The district court escalated its response over time, including warnings that continued noncompliance could result in dismissal and the use of lesser sanctions before imposing the ultimate sanction.
- After Nelson continued to violate the court’s orders requiring production of the tax returns, the district court dismissed the action as a sanction under Federal Rule of Civil Procedure 37.
- Nelson appealed, arguing that dismissal was too severe and that the district court did not sufficiently consider alternative sanctions.

## Issues

1. Whether the district court abused its discretion by dismissing Nelson’s case under Federal Rule of Civil Procedure 37 for repeated violations of discovery orders requiring production of his tax returns.

## Decision

- The Seventh Circuit affirmed.
- The court held that the district court acted within its discretion in dismissing the case as a discovery sanction after Nelson repeatedly violated orders and missed deadlines.
- The court rejected Nelson’s contention that the district court failed to consider lesser sanctions, noting the record showed warnings and incremental measures before dismissal.

## Legal Principles

- A district court may dismiss an action under Federal Rule of Civil Procedure 37 when a party repeatedly fails to obey discovery orders, especially where the record shows ongoing delay or contumacious conduct.
- Dismissal is a severe sanction, but it is permissible when lesser measures have not secured compliance and the party has been warned that dismissal may follow.
- Appellate review of a Rule 37 dismissal is for abuse of discretion; the court of appeals asks whether the district court made a reasoned judgment based on the pattern of noncompliance shown in the record.
- When a party claims it cannot comply with a discovery order, it must present a concrete, supported explanation; repeated failures without an adequate justification support stronger sanctions.

## Conclusion

Because Nelson repeatedly violated the district court’s discovery orders requiring production of his tax returns, missed court-imposed deadlines, and continued noncompliance after warnings and lesser sanctions, the Seventh Circuit held that dismissal under Rule 37 was not an abuse of discretion and affirmed the judgment.


Nelson v. Schultz, 878 F.3d 236 (2017)