Summary
In Jack's Factory Outlet v Pontiac State Bank, 95 Mich. App. 174; 290 N.W.2d 114 (1980), this Court stated that the disobedience must be wilful, but that such "wilfulness" does not require proof of wrongful intent.
Summary of this case from Daugherty v. MichiganOpinion
Docket No. 78-448.
Decided January 23, 1980.
David M. Jutkowitz, for plaintiffs.
Dickinson, Wright, McKean, Cudlip Moon (by Robert P. Hurlbert), for defendant.
The issue in this case is whether the trial court exceeded the powers granted under GCR 1963, 313.4, by dismissing plaintiffs' suit for failure to appear at a deposition.
On February 23, 1977, plaintiffs commenced action for $1,000,000 in damages predicated on defendant's alleged bad faith acceleration of a $35,000 secured loan to the corporate plaintiff (Factory Outlet) and personally guaranteed by the corporation's president (Ginsburg). The bank answered, asserting that the acceleration was made after the bank discovered that Factory Outlet's checking account was being used as a conduit for successive transfers of large sums without any apparent business purpose. According to the bank, the transfers created large balances of uncollected funds in the account. When both Ginsburg, Factory Outlet's sole shareholder, and Ernest Citron, the corporation's attorney, refused to explain the purpose for the unusual activity in the checking account, the bank called the loan.
Discovery proceedings were commenced against Citron who refused to answer questions under the claim of the attorney-client privilege. The bank then sought to depose Ginsburg. Three dates were scheduled but were not kept. Finally, deposition was scheduled for September 8, 1978. After this date was set, plaintiffs' counsel stated he had a criminal matter in Recorder's Court of Detroit, September 6-8, and could not attend. When counsel for defendant refused an adjournment, plaintiffs' counsel appeared before the court stating that the deposition could be taken September 18. An order was so entered on September 15, and, on September 16, defendant's counsel confirmed the date with plaintiffs' counsel.
Fifteen minutes before the deposition was to begin on September 18, plaintiffs' counsel informed the defendant that his client would not appear. Defendant then filed a motion to dismiss and for sanctions under GCR 1963, 313.4. Hearing on the motion was set for September 27, 1978. At the hearing, counsel stated Ginsburg was in New York City on September 18, but could appear for discovery-taking any time within the next two weeks. The motion to dismiss was denied but plaintiffs were ordered to pay $1,000 on or before October 4, 1978, at 5 p.m., said payment to recompense defendant for its costs and attorney fees incurred as a result of Ginsburg's failure to attend the deposition. The order further provided that if payment were not made within the time indicated, plaintiffs' complaint would be dismissed. Plaintiffs failed to pay within the one-week period set, and an order dismissing plaintiffs' complaint with prejudice was entered October 5, 1978. It is from this order that plaintiffs appeal of right.
Michigan GCR 1963, 313.2(2) empowers a trial judge to impose "just" sanctions for a party's failure to comply with a court discovery order. Plaintiffs contend on appeal that the action of the trial judge in assessing costs of $1,000 was an abuse of discretion. We disagree. The trial judge can appropriately take into account the following considerations: (1) the inconvenience to the defendant; (2) reasonable attorney's fees in preparation for and appearing at the deposition, together with filing and arguing the motion for sanctions; (3) the nature of the plaintiffs' willful disobedience; and (4) the general deterrent effect of the penalty. See, National Hockey League v Metropolitan Hockey Club, Inc, 427 U.S. 639; 96 S.Ct. 2778; 49 L.Ed.2d 747 (1976). Given the hours necessarily spent by the bank's attorneys preparing for the deposition scheduled for September 18, and the additional hours required to prepare and file the motion to dismiss, and the time spent at the hearing on said motion, we do not find that the sum of $1,000 is an unreasonable assessment. See David v Hooker, Ltd, 560 F.2d 412 (CA 9, 1977), Trans World Airlines, Inc v Hughes, 515 F.2d 173 (CA 2, 1975). The broad power of a trial judge to impose a variety of sanctions to enforce discovery proceedings is reflected in the following commentary:
The $1,000 assessment was not a fine payable to the court but was payable to defendant as defendant's costs and attorney fees for plaintiffs' willful refusal to make discovery as of September 27, 1978.
"Michigan General Court Rule 313.2 allows a court to impose a variety of sanctions against a party who refuses to make discovery, including an order dismissing the action or rendering judgment by default against the disobedient party. The sanctions are necessary elements of Michigan's `far-reaching, open and effective discovery practice' and are designed to ensure successful operation of liberal discovery by punishing litigants who refuse to proceed in good faith.
"Unfortunately, however, trial judges are reluctant to use these sanctions in all but the most flagrant cases, thereby significantly contributing to court congestion and litigation expense caused by abuses of the discovery process.
"Where a trial judge does choose to impose sanctions, Michigan appellate courts will not reverse unless the record demonstrates an abuse of discretion." Wasinger, Civil Procedure, 1978 Annual Survey of Michigan Law, 25 Wayne L Rev 241, 250-251 (1979).
Plaintiffs further contend that even if the trial court's order of September 27, 1978, assessing $1,000 costs was not an abuse of discretion, the court's subsequent order entered October 5, 1978, dismissing plaintiffs' action with prejudice was error because it cannot be said that the nonpayment was flagrant, wanton and repeated. Although Michigan is reluctant to impose so drastic a penalty as dismissal with prejudice, it is clear that GCR 1963, 313.2(2) and 313.4 allow a trial court to dismiss a case with prejudice for noncompliance with a court order and failure to appear at a deposition. Humphrey v Adams, 69 Mich. App. 577, 581; 245 N.W.2d 167 (1976), Krim v Osborne, 20 Mich. App. 237; 173 N.W.2d 737 (1969), lv den 383 Mich. 765 (1970). However, the disobedience must be willful. But to be "willful" does not require proof of wrongful intent.
"`To be "willful" the failure need not be accompanied by wrongful intent. It is sufficient if it is conscious or intentional, not accidental or involuntary.' 20 Mich App at 241." 69 Mich App at 580.
"The authority of the circuit judge to take the most drastic step of dismissal of plaintiff's complaint with prejudice is clear. However, we believe that such measures should be exercised cautiously. This is not a case where the failure to respond to discovery requests extends over substantial periods. E.g., Krim v Osborne, 20 Mich. App. 237; 173 N.W.2d 737 (1969). Nor is it a case in which the failure to provide discovery is in violation of a direct order of the trial court. E.g., Humphrey v Adams, 69 Mich. App. 577; 245 N.W.2d 167 (1976). In this case, in view of the relatively short time that elapsed between the failure to appear and the motion to dismiss, and the ambiguous showing of willfulness on the part of the plaintiff's agent, we conclude that the trial judge should have chosen less drastic measures to compel discovery." (Emphasis added.) MacArthur Patton Christian Ass'n v Farm Bureau Ins Group, 403 Mich. 474, 477; 270 N.W.2d 101 (1978).
During oral argument, counsel for plaintiffs explained that between Saturday, September 16, and Monday, September 18, 1978, he tried to contact his client but found his client was out of town on a buying trip. This ignores the fact that counsel chose the September 18th date in the first instance. Counsel also claims that within the seven-day period between the order to pay $1,000 and the order of dismissal with prejudice, counsel was unable to contact his client. If this latter fact is true, as counsel contends, his client's failure to obey the court's order was not willful as that term is used in Humphrey, supra. Though the question is close and though we share the respected trial court's frustration in trying to keep its docket current, we are disposed to hold that the instant case is more like the MacArthur Patton "relatively short time that elapsed between the failure to appear and the motion to dismiss" than the situation in Humphrey. In Humphrey, the trial court entered an order November 21, 1974, that plaintiff's answer to interrogatories should be filed by December 20, 1974. In the instant case, only seven days was given within which the $1,000 was to be paid and "in the event payment is made, Defendant's Motion is dismissed and the parties shall thereupon set a date for Mr. Ginsburg's deposition". It is entirely conceivable that during the short interval, counsel was unable to contact his client or not able to locate his client until too late to raise the $1,000.
The order further provided that "in the event plaintiffs fail to pay such costs on or before Wednesday, October 4, 1978 at 5:00 p.m., upon the filing of an Affidavit to that effect, Defendant's counsel may present to the Court for entry, forthwith and without notice to Plaintiffs, the attached Order dismissing Plaintiffs' First Amended Complaint with prejudice and costs".
However, we have already held that that part of the trial court's order of September 28, 1978, ordering plaintiffs to pay $1,000 valid. Only the date within which payment was due (October 4, 1978) is invalid. Additionally, given the short period within which payment was to be made, nothing appears in the record upon which we can conclude the failure to pay was willful. Accordingly, the trial court's order of October 5, 1978, dismissing plaintiffs' first amended complaint with prejudice, is vacated. The trial court's order of September 28, 1978, ordering payment of $1,000 is affirmed except as to the date of payment. This cause is remanded to the trial court. Payment of said $1,000 is to be made within 30 days from the date of release of this opinion. If said sum is paid within said 30-day period, Mr. Ginsburg's deposition shall be taken within 14 days thereafter. If said payment is not made, plaintiffs' first amended complaint shall be dismissed with prejudice.
Remanded in accordance with this opinion. No costs, neither party having prevailed in full.