Opinion
Case No. 06-22225-D-7, Adv. Pro. No. 07-2006-D, Docket Control No. MPD-3.
February 21, 2008
This memorandum decision is not approved for publication and may not be cited except when relevant under the doctrine of law of the case or the rules of claim preclusion or Issue preclusion.
MEMORANDUM DECISION
Plaintiff Linda Schuette, the chapter 7 trustee in this case ("the Trustee") seeks an order striking the answer filed by defendant Thomas Carter ("Carter") to the Trustee's complaint in this adversary proceeding, and entering Carter's default. For the reasons set forth below, the court will grant the Trustee's motion.
I. INTRODUCTION
On January 3, 2007, the Trustee filed a complaint seeking to set aside alleged fraudulent transfers, to recover property and/or monetary damages, for turnover of property, and for declaratory relief, thereby commencing this adversary proceeding. The defendants are Betsey Warren Lebbos, the Debtor in this case ("the Debtor"), individually and as a trustee of the Aida Madeleine Lebbos No. 2 Trust, and Jason Gold and Thomas Carter, as co-trustees of the Aida Madeleine Lebbos No. 2 Trust ("the Trust" or the "Aida Madeleine Lebbos Trust"). Aida Madeleine Lebbos is the Debtor's daughter.
The Bankruptcy Appellate Panel has observed that the positions of the three defendants in the adversary proceeding appear to be identical. Orders Dismissing Appeal, filed December 28, 2007, inCarter v. Schuette (In re Lebbos), BAP No. EC-07-1429, at 2:2-4, and Gold v. Schuette (In re Lebbos), BAP No. EC-07-1428, at 2:5-7 ("Orders Dismissing Appeal").
On October 10, 2007, the Trustee served on the Debtor, Gold, and Carter three notices of deposition, with requests for production of documents. The documents were to be produced and the depositions to be conducted on November 14, 2007, at 10:00 a.m. (Carter), November 14, 2007, at 2:00 p.m. (Gold), and November 15, 2007, at 10:00 a.m. (the Debtor), at a video conferencing center in Long Beach, California, where the Debtor resides. Carter also resides in Long Beach, in the condominium that is the subject of this adversary proceeding.
On October 29, 2007, the Trustee served an amended notice of deposition, changing the time of Carter's deposition from 10:00 a.m. to 1:00 p.m. on November 14, 2007.
On November 7, 2007, Carter caused to be faxed to the Trustee's counsel, Michael Dacquisto ("Trustee's Counsel"), a letter stating in part:
I am in Las Vegas on that date [November 14], and you should write me with other possible dates for you to come down and get my statement. You are wrong in trying to take property which belongs to Mrs. Lebbos' daughter and children.
Trustee's exhibits, filed November 28, 2007, DN 305, Exhibit C, p. 3. (All references to "DN" are to the number of entry of the document on the court's docket. Unless there is a specific reference to the parent bankruptcy case, the reference will be to the docket in this adversary proceeding.)
Carter asked the Trustee's Counsel to "give [him] several dates that are at least a month away. . . ."
The Trustee's Counsel responded the same day by letter, advising Carter that he would not cancel or continue the deposition, and that if Carter failed to appear or to produce documents, he would "ask the court for further relief, including a terminating sanction such as striking your answer, if filed, and entering your default." Carter states he did not receive this letter.
Trustee's exhibits, DN 305, Exhibit E.
Carter's joinder and opposition, filed January 4, 2008, DN 376, ¶ 4.
The Trustee's Counsel appeared at the time and place set for the deposition; Carter did not. On November 28, 2007, the Trustee filed a motion for a discovery sanction against Carter, in the form of an order striking his answer in this adversary proceeding and entering his default ("the Motion"). The Motion was brought on 14 days' notice, as permitted by the court's Amended Scheduling Order dated October 31, 2007.
At the initial hearing on the Motion, on December 12, 2007, the court fixed a briefing schedule. On January 4, 2008, Carter filed a document called a joinder and declaration, in which he joined in the Debtor's opposition to the Trustee's motion for sanctions against her and presented opposition to the Trustee's motion against him.
DN 376, hereinafter "Carter's Opposition."
Carter also joined in the joinder of Jason Gold to the Debtor's opposition.
On January 9, 2008, the Trustee filed a reply to Carter's Opposition, and on January 16, 2008, the court heard oral argument. The following parties appeared: Michael Dacquisto (by telephone), for the Trustee; Jason Gold (by telephone), on his own behalf; John Read (by telephone), making a special appearance for the Debtor; and Jeralyn Kay Spradlin (by telephone), for creditor George Alonso.
Since August 3, 2007, the effective date of the order authorizing the withdrawal of their former counsel, Raymond Aver, Gold and Carter have represented themselves in this adversary proceeding.
Carter did not appear at the hearing, either in person or by telephone.
The Motion having been briefed and argued by those parties wishing to be heard, the court took the Motion under submission.
II. ANALYSIS
This court has jurisdiction over the motion pursuant to 28 U.S.C. sections 1334 and 157(b)(1). The Motion is a core proceeding under 28 U.S.C. section (b)(2)(A), (E) (H).
A. The Meet and Confer Requirement
Following the Debtor's and Gold's lead, Carter states that the Motion "admits that Mr. Dacquisto failed to meet and confer with [him]." The court has addressed this issue in its memorandum decisions on the Trustee's motions for sanctions against the Debtor and Gold, Docket Control Nos. MPD-1 and MPD-2, and adopts herein its reasoning and conclusions on the issue.
Carter's Opposition, ¶ 6.
The court notes that Carter, like Gold, did not respond to the Trustee's Counsel's December 12, 2007 letter, although he admits he received it and found its contents to be inaccurate.
Carter's Opposition, ¶ 8.
B. Legal Standards for Terminating Sanctions
The Motion is brought pursuant to Fed.R.Civ.P. 37(d), incorporated in bankruptcy adversary proceedings by Fed.R.Bankr.P. 7037.
Unless otherwise indicated, Rule references are to the Federal Rules of Civil Procedure, as enacted and promulgated prior to December 1, 2007. Effective that date, the Rules were amended "to make them more easily understood and to make style and terminology consistent throughout the rules." The changes were "intended to be stylistic only." Notes of Advisory Committee on 2007 Amendments. Because this case was commenced prior to the effective date of the amendments, December 1, 2007, the earlier language will be used.
Rule 37(d) provides:
If a party . . . fails (1) to appear before the officer who is to take the deposition, after being served with a proper notice, or . . . (3) to serve a written response to a request for inspection submitted under Rule 34, after proper service of the request, the court in which the action is pending on motion may make such orders in regard to the failure as are just, and among others it may take any action authorized under subparagraphs (A), (B), and (C) of subdivision (b)(2) of this rule. . . . In lieu of any order or in addition thereto, the court shall require the party failing to act . . . to pay the reasonable expenses, including attorney's fees, caused by the failure unless the court finds that the failure was substantially justified or that other circumstances make an award of expenses unjust.
The failure to act described in this subdivision may not be excused on the ground that the discovery sought is objectionable unless the party failing to act has a pending motion for a protective order as provided by Rule 26(c).
In the circumstances listed above, Rule 37(b)(2)(C), in turn, permits the court to enter "[a]n order striking out pleadings or parts thereof, . . . or rendering a judgment by default against the disobedient party. . . ." Such a sanction is commonly referred to as a terminating sanction, because it terminates the party's right to a trial on the merits.
"A terminating sanction, whether default judgment against a defendant or dismissal of a plaintiff's action, is very severe."Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, 482 F.3d 1091, 1096 (9th Cir. 2007). As a result, the violation giving rise to the sanction "must be due to the 'willfulness, bad faith, or fault' of the party." Jorgensen v. Cassiday, 320 F.3d 906, 912 (9th Cir. 2003), citing Hyde Drath v. Baker, 24 F.3d 1162, 1167 (9th Cir. 1994), Fjelstad v. Am. Honda Motor Co., 762 F.2d 1334, 1341 (9th Cir. 1985).
"Disobedient conduct not shown to be outside the control of the litigant is sufficient to demonstrate willfulness, bad faith, or fault." Jorgensen, 320 F.3d at 912, quoting Hyde Drath, 24 F.3d at 1166.
The Ninth Circuit has created a five-part test, with three subparts to the fifth part, for determining whether a terminating sanction is just:
"(1) the public's interest in expeditious resolution of litigation; (2) the court's need to manage its dockets; (3) the risk of prejudice to the party seeking sanctions; (4) the public policy favoring disposition of cases on their merits; and (5) the availability of less drastic sanctions." [Citation] The sub-parts of the fifth factor are whether the court has considered lesser sanctions, whether it tried them, and whether it warned the recalcitrant party about the possibility of case-dispositive sanctions. [Citation] This "test" is not mechanical. It provides the district court with a way to think about what to do, not a set of conditions precedent for sanctions or a script that the district court must follow. . . .
Conn. Gen. Life Ins. Co., 482 F.3d at 1096, quoting Jorgensen, 320 F.3d at 912, and citing Valley Eng'rs v. Electric Eng'g Co., 158 F.3d 1051, 1057 (9th Cir. 1998).
"[T]he most critical factor is not merely delay or docket management concerns, but truth." Conn. Gen. Life Ins. Co., 482 F.3d at 1097.
What is most critical for case-dispositive sanctions, regarding risk of prejudice and of less drastic sanctions, is whether the discovery violations "threaten to interfere with the rightful decision of the case."
Valley Eng'rs., 158 F.3d at 1057, quoting Adriana Intl. Corp. v. Lewis Co., 913 F.3d 1406, 1412 (9th Cir. 1990).
Sometimes courts respond to contumacious refusal to produce required discovery or comply with orders compelling discovery with suggestions that lawyers "quit squabbling like children" and work things out for themselves. That can operate to the advantage of a dishonest, noncompliant party, and can prevent the truth from coming out.
Conn. Gen. Life Ins. Co., 482 F.3d at 1097.
Thus, where a "pattern of deception and discovery abuse" has made it impossible for the court to conduct a trial "with any reasonable assurance that the truth would be available," terminating sanctions are appropriate. "It is appropriate to reject lesser sanctions where the court anticipates continued deceptive misconduct." Conn. Gen. Life Ins. Co., 482 F.3d at 1097, quoting Anheuser-Busch, Inc. v. Natural Beverage Distribs., 69 F.3d 337, 352 (9th Cir. 1995).
C. The Debtor's Prior Behavior
Although the Motion is against Carter, for reasons that are set forth below, the court finds that the Debtor's conduct in her parent bankruptcy case and in this adversary proceeding bears on the resolution of the Motion. Thus, the court incorporates herein the findings and conclusions set forth in its memorandum decision on the Trustee's motion for sanctions against the Debtor, Docket Control No. MPD-1.
D. Carter's Prior Behavior in this Adversary Proceeding
Whereas Gold has consistently followed the Debtor's direction in this proceeding, Carter has followed Gold's. Therefore, the court adopts herein the findings and conclusions set forth in its memorandum decision on the Trustee's motion for sanctions against Gold, Docket Control No. MPD-2.
As just indicated, Carter has followed Gold's lead in this matter. First, in connection with the motion of Gold and Carter to vacate their defaults, Carter testified, "I left it to Jason Gold to retain counsel to defend the Aida Madeleine Lebbos No. 2 Trust."
Reply to opposition to motion for relief from default, filed March 21, 2007, DN 75, p. 9.
In his motion to withdraw as counsel for Gold and Carter, filed May 2, 2007, Raymond Aver testified that he had spoken several times with Gold, but had never spoken with Carter. Gold filed opposition to Aver's motion, and appeared at the hearings. Carter did not respond to the motion, and did not appear at the June 6, 2007 hearing or the July 11, 2007 continued hearing. Gold appeared at the August 1, 2007 hearing on the motion Aver had filed to extend the deadline for Gold and Carter to respond to the complaint; Carter did not.
Motion to withdraw, DN 125, p. 12.
When the extended deadline finally arrived, on August 17, 2007, Gold and Carter, each ostensibly pro se, filed three motions each — to dismiss the adversary proceeding, to change its venue, and to disqualify the undersigned as the judge in the proceeding. Also on August 17, the Debtor filed her second motion to change venue and her third motion to dismiss the adversary proceeding, and on September 6, her second motion to disqualify the undersigned. As the court discussed in its memorandum decisions on the Trustee's motions against the Debtor and Gold, the motions of all three defendants were strikingly similar to each other. The court notes that an individual with no legal background, such as Carter, almost certainly could not have drafted the motions filed by Carter or the accompanying points and authorities.
Unlike the Debtor and Gold, Carter has no legal background. He has testified, "I am not an attorney, and do not have any legal education or training." Reply to opposition to motion for relief from default, filed March 21, 2007, DN 75, p. 9.
The court observes that the providing of legal arguments and points and authorities to Carter may well constitute the practice of law, for which neither the Debtor, a disbarred attorney, nor Gold, a paralegal and law student, is licensed.
The court has already concluded that the Debtor is writing for Gold and Carter and directing the course of their conduct and responses in this adversary proceeding. The court has considered Carter's testimony to the contrary, and finds it not credible. First, Carter does not state that he prepared the pleadings he has filed in this case. Instead, as with Gold's pleadings, it is clear the Debtor prepared them. The Trustee's Counsel asked Carter on December 12, 2007 about the pleadings he has filed in this case. Carter replied that someone was preparing them and looking at them on his behalf, but he refused to say who that was. In the face of this evidence, Carter maintains the Debtor is not controlling him, but still fails to identify the writer of his pleadings.
Carter's Opposition, ¶ 2:
I had my November 6, 2007 letter FAXED to him [the Trustee's Counsel]. I prepared this letter and signed it, and Ms. Lebbos is not involved in my affairs, in the trust, or in the property. She is not controlling me or this litigation. She has nothing to do with the trust and has not even been on the property for several years. I am my own man, and Mr. Dacquisto's claims to the contrary are wrong.
Trustee's exhibits, filed January 9, 2008, DN 387, Exhibit A.
Carter states that the Trustee's Counsel's recitation of their December 12, 2007 telephone conversation is inaccurate. Carter's Opposition, ¶ 8. Carter does not mention the statements in Counsel's confirming letter about whether Carter had any documents pertaining to the Trust or about who had been writing Carter's pleadings. The court declines to find that these portions of the conversation simply did not occur. Thus, the court accepts the Trustee's Counsel's version of the conversation.
Further, the Debtor, Gold, and Carter have testified in their oppositions to the Trustee's sanctions motions that they spent 78 hours, 26 hours, and six hours, respectively, responding to the deposition notices and the Trustee's motions. It is clear that the Debtor is primarily responsible for those responses.
The Debtor's significant time commitment also belies the repeated contention that she has nothing to do with the Trust or the property.
Finally, despite his status as a pro se defendant in this adversary proceeding, Carter has not appeared at a single hearing. He did not appear at the October 31, 2007 hearings on his own motions to dismiss and to change venue. He did not even appear at either the preliminary or the final hearing on the present motion, in which the Trustee seeks to strike his answer and enter his default in the adversary proceeding.
E. Carter's Reasons for Failing to Attend the Deposition
The court finds that, against the backdrop of this bankruptcy case and this adversary proceeding, Carter's reasons for failing to attend the deposition and to produce the required documents are not sufficient. Instead, the record more than supports the conclusion that Carter's failure to act was willful and in bad faith.
At no time between the date of the notice of deposition, October 10, 2007, and the scheduled date of the deposition, November 14, 2007, or at all, did Carter seek a protective order. Instead, on November 7, 2007, he faxed a letter to the Trustee's Counsel, stating, "I am in Las Vegas on that date [the date of the deposition] and you should write me with other possible dates for you to come down and get my statement." He did not disclose how long he would be in Las Vegas or offer alternative dates for the deposition. Carter did not disclose and has not since disclosed the reason he would be in Las Vegas; thus, the court cannot conclude that he was required to be there on November 14. Instead, the court concludes that Carter could have attended the deposition but chose not to.
The failure to attend one's deposition or to respond to a request for inspection of documents or property "may not be excused on the ground that the discovery sought is objectionable unless the party failing to act has a pending motion for a protective order as provided by Rule 26(c)." Fed.R.Civ.P. 37(d).
Trustee's exhibits, DN 305, Exhibit C, p. 3.
The language "you should write me with other possible dates" echoes the Debtor's argument that the Trustee's Counsel should have cleared dates with the three defendants in advance, an argument also made by Gold. Carter also mirrored the Debtor's and Gold's argument that they needed time to retain counsel to represent them at the depositions., with the caveat that Carter was relying on Gold to find counsel, as he had at the outset of the case. "I understand my co-trustee, Jason Gold, is hiring a lawyer to represent us and so we need to have that taken care of first as well."
The court makes no finding in this decision as to whether Carter, as a trustee of a trust, was required to have counsel in this matter, or as to whether he should have had counsel. The court finds only that, having chosen to rely on his lack of counsel as an excuse for failing to attend the deposition, Carter is chargeable with inexcusable delay in finding counsel for over six months. As with the Debtor and Gold, the lack of counsel does not excuse Carter from attending the deposition or producing the required documents.
Carter's next excuse was that he "need[ed] to get permission to leave my work well enough in advance. . . ." Thus, he asked the Trustee's Counsel to give him "several dates that are at least a month away. . . ." In fact, the notice of deposition served October 10, 2007 gave Carter more than a month's notice of the November 14 deposition. Carter did not state that his employer would not allow him to be off work on November 14, or even that he had informed his employer about the deposition. Again, Carter offers no evidence that he could not have attended the deposition had he chosen to do so.
On December 5, 2007, Carter filed a joinder in the Debtor's motion for a continuance of the preliminary hearings on the Trustee's motions, DN 337. In that joinder, Carter suggested January 28, 29, and 30, 2008 as possible dates for the depositions, but even as late as December 5, he stated that he had not cleared those dates with his employer. In his opposition to the Motion, filed January 4, 2008, Carter did not mention the January dates, and thus, apparently still had not cleared them with his employer. Even if he had done so, however, his effort would have been too little, too late.
The Ninth Circuit has "squarely rejected" the proposition that a belated offer cures a failure to comply with discovery. Henry v. Gill Industries, Inc., 983 F.2d 943, 947 (9th Cir. 1993), citing North Am. Watch Corp. v. Princess Ermine Jewels, 786 F.2d 1447, 1451 (9th Cir. 1986) [order of dismissal affirmed: "Belated compliance with discovery orders does not preclude the imposition of sanctions."]; G-K Properties v. Redevelopment Agency of San Jose, 577 F.2d 645, 647-48 (9th Cir. 1978) [order of dismissal affirmed: "last minute tender" of discovery does not cure effects of discovery misconduct].
Finally, Carter complained about the Trustee's Counsel's amended notice of deposition. "Please do not send changes at the last minute like you just did as that is not fair." The change complained of was in the time of the deposition — from 10:00 a.m. to 1:00 p.m. Carter did not explain why this relatively minor change was unfair. In fact, he and his co-defendants are the ones who have engaged in last-minute tactics, each having waited over three weeks from their likely receipt of the notices of deposition before writing to unilaterally cancel the depositions.
Carter states in his opposition to the Motion that he did not receive the Trustee's Counsel's November 7, 2007 letter. He testifies that he "received no phone call and no letter in response to my request to reschedule." Rather than follow up to be certain the Trustee's Counsel had received his letter, or to verify that the Trustee's Counsel had accepted his unilateral cancellation, Carter simply failed to appear. This is not an acceptable response to a notice of deposition.
Carter's Opposition, ¶ s 3, 4, 5.
Carter repeatedly refers to the deposition as a "statement," apparently seeking to persuade the court of his lack of legal sophistication. The attempt fails. Proper participation in the formal processes of discovery is an obligation of any party to a lawsuit. Carter's pro se status does not excuse him from complying with discovery requests. See American Ass'n of Naturopathic Physicians v. Hayhurst, 227 F.3d 1104, 1108 (9th Cir. 2000), citing Briones v. Riviera Hotel Casino, 116 F.3d 379, 381 (9th Cir. 1997); King v. Atiyeh, 814 F.2d 565, 567 (9th Cir. 1987) ["Pro se litigants must follow the same rules of procedure that govern other litigants."]; Lindstedt v. City of Granby, 238 F.3d 933, 937 (8th Cir. 2000) ["A pro se litigant is bound by the litigation rules as is a lawyer, particularly . . . with the fulfilling of simple requirements of discovery."].
As discussed in the court's memorandum decision on the Trustee's motion against Gold, Gold assured the court he would have new counsel "onboard" by August 3. His failure to retain replacement counsel by the time of the depositions is chargeable to Carter, who voluntarily chose to rely on Gold. The court notes that Carter presumably chose to serve as a trustee of the Aida Madeleine Trust voluntarily, and thereby willingly accepted all the responsibilities of that role, including compliance with discovery requests in lawsuits involving the Trust.
The court finds that, as with the Debtor and Gold, Carter's excuses for failing to attend the deposition and failing to produce the required documents reflect an intention to prevent the Trustee from acquiring relevant information, and to prevent a trial on the merits after the timely completion of legitimate discovery. The court finds Carter's failure to act to have been deliberate, willful, and in bad faith.
F. Consideration of the Five Factors
1. The Public's Interest in the Expeditious Resolution of Litigation
"[T]he public has an overriding interest in securing 'the just, speedy, and inexpensive determination of every action." Allen v. Bayer Corp. (In re: Phenylpropanolamine (PPA) Prods. Liab. Litig.), 460 F.3d 1217, 1227 (9th Cir. 2006), quoting Fed.R.Civ.P. 1. By contrast, delay "is costly in money, memory, manageability, and confidence in the process." Id.
As with Gold, the documents the Trustee seeks from Carter concern, exclusively, the Aida Madeleine Lebbos Trust and the property the Debtor alleges is owned by the Trust. In his November 6, 2007 letter to the Trustee's Counsel (faxed November 7), Carter referred three times to the Trustee's Counsel taking his "statement." He did not mention the request for production of documents. Thus, by the time scheduled for the production, November 14, 2007, Carter had ignored the request completely.
Trustee's exhibits, DN 305, Exhibit A.
In their December 12, 2007 telephone conversation, the Trustee's Counsel asked Carter whether he had any of the requested documents; Carter replied that he had some papers about the Trust somewhere and would need to look for them. This response, coming two months after service of the request and one month after the scheduled date for production, was arrogant, cavalier, and contemptuous.
As indicated above, Carter disputes that the Trustee's Counsel's December 12, 2007 letter accurately reflects their telephone conversation. However, in any event, Carter gave the Trustee's Counsel nothing helpful in that conversation. "I said that I needed to look at it and to let me think about it." Carter's Opposition, ¶ 8.
In his December 12 letter to all three defendants, the Trustee's Counsel asked for the documents by January 4, 2008. Carter did not respond and did not produce the documents, although he has acknowledged receiving the letter. Instead, on January 4, he filed his opposition to the Motion, stating, "I think you have to punish Mr. Dacquisto for not being truthful or cooperative." Carter failed to mention the Trustee's request for the documents, or to suggest that he needed more time, or to indicate that he had taken any steps to comply. In the six hours he has spent on this matter, he has failed to come up with a single document. This failure is inexcusable.
Carter's Opposition, ¶ 8.
The court also concludes that neither Carter's trip to Las Vegas nor his employment prevented him from attending the deposition or producing the documents, and that his failure to have counsel to represent him was the result of months of unreasonable and deliberate delay.
Thus, the court concludes that Carter, like Gold, has exhibited the same intention to delay, obstruct, frustrate, and wear down the Trustee and Trustee's Counsel as has the Debtor. Clearly, the public's interest in the inexpensive and expeditious handling of bankruptcy cases is not being served. This factor weighs heavily in favor of a terminating sanction.
2. The Court's Need to Manage its Docket
Dismissal serves the court's need to manage its docket, when "a [party's] noncompliance has caused the action to come to a halt, thereby allowing the [party], rather than the court, to control the pace of the docket." Allen, 460 F.3d at 1234, citing Yourish v. California Amplifier, 191 F.3d 983, 990 (9th Cir. 1999).
Carter, like Gold, has clogged the court's docket with motions to dismiss, to change venue, and to disqualify the undersigned that were duplicative of motions previously filed and denied. He has adopted the Debtor's arguments and stalling tactics in his efforts to avoid complying with his discovery obligations, thus ensuring that discovery matters would also clog the court's docket. This factor weighs heavily in favor of a terminating sanction.
3. The Risk of Prejudice to the Party Seeking Sanctions
"Failing to produce documents as ordered is considered sufficient prejudice." Allen, 460 F.3d at 1227, citing Adriana, 913 F.2d at 1412. Further, prejudice is presumed from unreasonable delay, and the burden to show actual prejudice shifts to the party seeking the sanction only after the respondent has given a non-frivolous excuse for the delay.Hernandez v. City of El Monte, 138 F.3d 393, 400-01 (9th Cir. 1998); see also Malone, 833 F.2d 128, 131 (9th Cir. 1987) ["Whether prejudice is sufficient to support an order of dismissal is in part judged with reference to the strength of the plaintiff's excuse for the default."].
Carter deliberately and without justification failed to appear for his deposition and failed to produce required documents. Whether he is in charge of own defense or is taking direction from the Debtor and/or Gold, his conduct has increased administrative expenses and delayed the ultimate distribution to creditors. He behavior has drastically impaired the Trustee's ability to test the validity of his defenses and, ultimately, to put on her case. This factor weighs heavily in favor of a terminating sanction. 4. The Public Policy Favoring Disposition of Cases on their Merits
"[T]he risk of prejudice to the Defendants in this matter is great. Without the critical information . . ., Defendants point out that they will not only be unable to file dispositive motions, but will be unable to fully prepare to try the case."Bonneville v. Kitsap County, 2007 U.S. Dist. LEXIS 25983 * 12 (W.D. Wash. 2007).
This factor normally weighs against a terminating sanction. However, "a case that is stalled or unreasonably delayed by a party's failure to comply with deadlines and discovery obligations cannot move forward toward resolution on the merits."Allen, 460 F.3d at 1228.
5. The Availability of Less Drastic Sanctions
Factors that indicate whether a [trial] court has considered alternatives include: "(1) Did the court explicitly discuss the feasibility of less drastic sanctions and explain why alternative sanctions would be inadequate? (2) Did the court implement alternative methods of sanctioning or curing the malfeasance before ordering dismissal? (3) Did the court warn the plaintiff of the possibility of dismissal before actually ordering dismissal?"
Allen, 460 F.3d at 1228-29, quoting Malone, 833 F.2d at 132.
Alternative sanctions may include "a warning, a formal, reprimand, placing the case at the bottom of the calendar, a fine, the imposition of costs or attorney fees, the temporary suspension of the culpable counsel from practice before the court, . . . dismissal of the suit unless new counsel is secured[,] . . . preclusion of claims or defenses, or the imposition of fees and costs upon plaintiff's counsel. . . ."Malone, 833 F.2d at 132 n. 1, quoting Titus v. Mercedes Benz of North America, 695 F.2d 746, 749 n. 6 (3rd Cir. 1982).
The test provides "a way [for the court] to think about what to do, not a set of conditions precedent for sanctions or a script that the . . . court must follow." Conn. Gen. Life Ins. Co., 482 F.3d at 1096. Thus, "it is not always necessary for the court to impose less serious sanctions first, or to give any explicit warning." Adriana, 913 F.2d at 1413.
The critical test is whether the conduct of the party resisting discovery renders it unlikely that the truth will come out. A terminating sanction is appropriate where "a party's discovery violations make it impossible for a court to be confident that the parties will ever have access to the true facts." Valley Eng'rs., 158 F.3d at 1058. In such a situation, the court is justified in concluding that no lesser sanction would be effective.
As indicated above, the court concludes that the Debtor has written substantially all of the documents filed by Carter. She has developed and implemented a pattern of delaying and impeding the progress of the action, a pattern Carter, like Gold, has followed without exception. Carter, like Gold, has given the court no reason to expect any different behavior in the future. The court has already concluded that no lesser sanction than a terminating sanction would be effective as to the Debtor or Gold. The court finds no reason for a different conclusion with respect to Carter.
Further, the court finds that a terminating sanction will not unfairly punish Carter for the Debtor's or Gold's conduct. Carter has voluntarily chosen from the beginning to allow the Debtor and Gold to act on his behalf in this litigation. He has participated in their misconduct through his involvement with them. He has been "content to rest his response" on "a common basis" with them, and he has failed to "act independently" of them in any way. He has allowed and endorsed the conduct of the Debtor and Gold on his behalf, and as a result, he cannot avoid the consequences of their misconduct. Thus, terminating sanctions are as appropriate as to him as to them.
See Malone, 833 F.2d at 134, citing Chism v. National Heritage Life Ins. Co., 637 F.2d 1328, 1332 (9th Cir. 1981), overruled on other grounds, Bryant v. Ford Motor Co., 844 F.2d 602, 605 (9th Cir. 1987).
See Adriana, 913 F.2d at 1414.
See G-K Properties, 577 F.2d at 648-49.
Moreover, Carter himself is no innocent party in this matter. He independently chose not to appear for his deposition, and took it upon himself to write to the Trustee's Counsel, with the weakest of excuses. He has ignored the Trustee's request for production of documents for over four months. He ignored the Trustee's Counsel's final attempt to arrive at an acceptable arrangement, set forth in the December 12, 2007 letter. He made no offer of cooperation in his opposition to the Motion. Even when viewed independently, Carter's conduct is clearly calculated to prevent the disclosure of relevant information and to obstruct the timely resolution of this adversary proceeding on its merits. The court finds that any lesser sanction than a terminating sanction would be unproductive.
Finally, the court will address the issue of prior warnings that a failure to cooperate might result in case-dispositive sanctions. For reasons discussed in the court's memorandum decision on the Trustee's motion against Gold, and incorporated herein, the court concludes that no warning expressly directed to Carter was necessary. Instead, the court's comments directed to the Debtor at the October 31, 2007 hearings were sufficient to warn Carter that his failure to respond appropriately to the Trustee's discovery requests might result in terminating sanctions. But, as further discussed below, even if a direct warning to Carter was required, the court finds such in the Trustee's Counsel's warning contained in the Motion itself.
"[I]t is not always necessary for the court to impose less serious sanctions first, or to give any explicit warning."Adriana, 913 F.2d at 1413.
On the court's calendar on October 31, 2007 were Gold's and Carter's motions, filed August 17, 2007, to dismiss this proceeding and to change its venue. Gold appeared, and thus heard the court's findings and conclusions stated on the record concerning the Trustee's motion for contempt sanctions against the Debtor, in the form of an order striking her answer and entering her default in this adversary proceeding. Carter did not appear, and thus, did not hear the findings and conclusions.
The court finds that Carter is chargeable with the knowledge he would have had if he had appeared in proper prosecution of his own motions. To the extent Carter was relying on Gold to act on his behalf in this proceeding, as Carter's own testimony indicates, Carter is chargeable with Gold's knowledge, and thus, with awareness of the warning the court gave on October 31, 2007.
The court notes also that the Trustee's motion for contempt against the Debtor, that generated the October 31, 2007 findings and conclusions, was served on Aver, then counsel for Gold and Carter.
Proof of service, filed July 31, 2007, DN 342 in Case No. 06-22225.
Finally, the Trustee's motion for terminating sanctions against Carter himself, the motion that is the subject of this ruling, provided a clear warning to Carter that there was a very real risk of such sanctions if he did not cooperate. The transcript of the October 31, 2007 hearing, with the court's findings and conclusions, was filed and served as an exhibit to the Motion. And the Motion itself plainly warned Carter of the terminating sanctions the Trustee was seeking against him.
Where a terminating sanction is issued following a noticed motion, the lack of a prior warning by the court is less significant than when the sanction is issued sua sponte. See Allen, 460 F.3d at 1229; Moneymaker, 31 F.3d at 1455. In essence, the motion itself provides the warning, allowing the responding party to "remed[y] the situation by presenting to the bankruptcy court a reason for his conduct that outweigh[s] the prejudice to [the moving party]." Moneymaker, 31 F.3d at 1455.
After the Motion was served and the preliminary hearing had been conducted, the Trustee's Counsel wrote to the defendants on December 12, 2007, offering a reasonable seven-part solution to the discovery impasse. The Trustee's Counsel requested that each defendant indicate which parts he or she agreed with, and as to those parts that were not agreeable, that he or she provide "a concrete counter proposal for that item." Carter, at that time on full notice from the Motion that he risked terminating sanctions if he did not cooperate, made no response at all.
The court concludes that its findings and conclusions stated on the record on October 31, 2007, together with the language of the Motion itself, provided ample warning to Carter that he would face terminating sanctions if he did not cooperate with the Trustee's discovery requests.
III. CONCLUSION
Most important, the court must determine whether a "pattern of deception and discovery abuse" has made it impossible for the court to conduct a trial "with any reasonable assurance that the truth would be available," Conn. Gen. Life Ins. Co., 482 F.3d at 1097, quoting Anheuser-Busch, Inc., 69 F.3d 337, 352 (9th Cir. 1995); in other words, whether the discovery violations "threaten to interfere with the rightful decision of the case." Valley Eng'rs., 158 F.3d at 1057, quoting Adriana, 913 F.3d 1406, 1412 (9th Cir. 1990).
As discussed in the court's memorandum decision on the Trustee's motion for sanctions against the Debtor, the Debtor has established a pattern of deception, concealment, delay, and obstruction with respect to information legitimately sought by the Trustee in both the parent bankruptcy case and this adversary proceeding. Gold has consistently adopted and furthered that pattern. Carter has chosen to rely on the Debtor and Gold to present his arguments and represent his interests in this proceeding, and to follow their direction in his response to the Trustee's discovery requests.
In addition, Carter's own attitude toward discovery in this proceeding demonstrates, independently, that he intends to prevent the disclosure of relevant information and to obstruct the timely resolution of this adversary proceeding on its merits. In his November 6, 2007 letter to the Trustee's Counsel, immediately after informing Counsel that he would be in Las Vegas on the relevant date, he added, "You are wrong in trying to take property which belongs to Ms. Lebbos' daughter and children." The remark was gratuitous but revealing. Apparently Carter, like the Debtor and Gold, expects the Trustee to accept his version of the facts without further exploration.
Trustee's exhibits, DN 305, Exhibit C, p. 3.
Further, having failed to appear for his deposition or to produce any documents in response to a legitimate request, and having failed to seek a protective order, and in the face of a motion for terminating sanctions, Carter took issue with the Trustee's Counsel's choice of procedures. "Mr. Dacquisto could have called me to tell me what he wanted and for me to be able to respond, but he did not do so." Carter, like the Debtor, appears to believe he has the right to control the manner in which the Trustee seeks information in this case; he does not.
Carter's Opposition, ¶ 2.
In the end, facing terminating sanctions, Carter did not offer a definite date for his deposition, did not offer any documents, or even a deadline for producing documents, and did not state that he had taken any steps toward gathering the documents. Instead, he urged this court "to punish Mr. Dacquisto for not being truthful or cooperative."
Id., ¶ 10.
Given these remarks and Carter's continuing refusal to cooperate with discovery, together with his reliance on the Debtor and Gold, who have exhibited nothing but intransigence in this case, the court is unable to conclude that if lesser sanctions were applied as to Carter, the truth would ultimately come out. Thus, terminating sanctions are appropriate, and accordingly, the court will grant the Motion.
As required by the amended scheduling order in this adversary proceeding, the Trustee's Counsel has submitted his declaration setting forth the attorney's fees and costs incurred in connection with his travel to Long Beach for the deposition and document production, and in connection with the Motion. The court has reviewed that declaration, and finds that the amounts charged are reasonable.
For the reasons set forth above, the court further finds that Carter's failure to appear and to produce documents was not substantially justified, and that there is no other circumstance that would make an award of attorney's fees and costs unjust. Thus, in accordance with Fed.R.Civ.P. 37(d), incorporated herein by Fed.R.Bankr.P. 7037, the court will award the Trustee attorney's fees in the amount of $2,475.00 plus costs in the amount of $987.00, a total of $3,462.00, to be paid by Carter.
Of this total sum of $3,462.00, the sum of $2,609.40 is a joint and several responsibility among defendant Betsey Warren Lebbos, defendant Jason Gold, and defendant Thomas Carter, and the balance, $852.60, is payable solely by Carter.
The court will issue an order consistent with this memorandum.