Singh et al v. Hancock Natural Resources Group, Inc. et al

Filing 72

FINDINGS and RECOMMENDATIONS Granting Defendant's Motion for Terminating Sanctions 63 , signed by Magistrate Judge Jennifer L. Thurston on 2/21/2017. Referred to Chief Judge Lawrence J. O'Neill. Objections to F&R due within 14 days. (Hall, S)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 DHILLON SINGH, et al., Plaintiffs, 12 v. 13 14 HANCOCK NATURAL RESOURCES GROUP, INC., et al., 15 Defendants. 16 17 ) ) ) ) ) ) ) ) ) Case No.: 1:15-cv-01435-LJO-JLT FINDINGS AND RECOMMENDATIONS GRANTING DEFENDANT’S MOTION FOR TERMINATING SANCTIONS (Doc. 47) In this action, the plaintiffs contend Goose Pond breached a contract to sell 2,470 acres of 18 farmland that was, at the time, being used as an almond farm. (Doc. 29 at 4) Plaintiffs have failed 19 to provide discovery as ordered by the Court and failed to comply with its order imposing 20 monetary sanctions. For the following reasons, the Court finds the imposition of sanctions is 21 appropriate, and recommends the motion for terminating sanctions be GRANTED. 22 I. 23 Background In November 2017, Defendants filed a motion to compel discovery, seeking to compel the 24 production of documents with the associated metadata, as well as supplemental responses to the 25 requests for production and interrogatories. (Doc. 47) The Court granted the motion in part on 26 December 29, 2016. (Doc. 62) In doing so, the Court noted the parties agreed “the defendants 27 requested email communications in TIFF format with the corresponding metadata.” (Id. at 3) 28 Defendants identified inconsistencies in email communications, which appeared to show alterations 1 1 to the evidence, which were not addressed by Plaintiffs. (Id. at 4) Accordingly, the Court granted the 2 motion to compel “any request for electronically held documents,” and ordered Plaintiffs to “produce 3 all emails and other documents sought by the defendants in the format demanded with the 4 accompanying metadata from the native computer.” (Id.) Further, the Court ordered Plaintiffs to 5 produce responsive documents such as the Articles of Incorporation; “the Purchase and Sale 6 Agreement of August 4, 2015 in the format demanded with the accompanying metadata from the 7 native computer;” a legible copy of the summary of damages; and amended responses to several 8 discovery requests. (See, e.g., 6, 7, 9) The Court determined the imposition of monetary 9 sanctions was appropriate and ordered Plaintiffs to pay $4,800 to counsel for the defendants within 10 11 ten days of the date of service. (Id. at 16) On January 19, 2017, Defendant filed the motion now pending, asserting Plaintiffs failed to 12 comply with the Court’s order and requesting terminating sanctions. (Doc. 63) Defendant asserts 13 that “the majority of Plaintiffs’ supplemental responses indicate that they have no other responsive 14 documents aside from what they already produced, ‘despite what may have been testified to at 15 Plaintiffs’ [sic] deposition.’” (Id., emphasis omitted) Defendant contends the failure to produce 16 emails with metadata confirms that Plaintiff’s produced “fraudulently altered key emails.” (Id. at 12) 17 Given the failures to comply with the Court’s order, Defendant seeks the imposition of terminating 18 sanctions, and the dismissal of Plaintiffs’ claims with prejudice. (Id. at 25) In the alternative, 19 Defendant requests evidentiary sanctions and instruction sanctions be imposed. (Id. at 29-30) 20 Finally, Defendant requests monetary sanctions or the time expended “bringing this motion and 21 attempting to uncover Plaintiffs’ fraud on the Court and [Defendant].” (Id. at 33) 22 Plaintiffs filed their response on January 26, 2017, asserting that it “it became evident certain 23 materials were incapable of being produced by the Plaintiffs, in hard-copy or by meta-data, despite 24 their references in the Plaintiffs’ Complaint.” (Doc. 66 at 2) As a result, Plaintiffs offered “to strike 25 the offending passages consistent with FRCP 37(b)(2)(A)(iii).” (Id.) In addition, Plaintiffs contend 26 that “[p]ursuant to the Court's Order of December 29th, 2016, Plaintiffs provided supplemental 27 responses to Defendant's Request for Productions and Interrogatories… to the Defendant on January 28 9th, 2017 per the parties’ agreement.” (Id. at 4) According to Plaintiffs, they “have gone above and 2 1 beyond in replying to these requests to the extent they are able.” (Id. at 6) However, Plaintiffs 2 acknowledge that they did not produce “certain materials” upon which they relied, despite the Court’s 3 order. (Id. at 7-8) Rather, Plaintiffs’ counsel indicates he “shares in [Defendant’s] frustration,” and is 4 willing to “strik[e] paragraphs or causes of action that cannot be supported by admissible evidence.” 5 (Id. at 8) 6 II. Rule 37 Sanctions 7 Pursuant to the Federal Rules of Civil Procedure, if a party “fails to obey an order to provide 8 or permit discovery . . . the court where the action is pending may issue further just orders.” Fed. R. 9 Civ. P. 37(b). “Just orders” may include the following: (i) directing that the matters embraced in the order or other designated facts be taken as established for the purposes of the action, as the prevailing party claims; (ii) prohibiting the disobedient party from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence; 13 (iii) striking pleadings in whole or in part; 14 (iv) staying further proceedings until the order is obeyed; 15 (v) dismissing the action or proceedings in whole or in part; 16 (vi) rending a default judgment against the disobedient party; or 17 (vii) treating as contempt of court the failure to obey any order except an order to submit to a physical or mental examination. 10 11 12 18 19 Fed. R. Civ. P. 37(b)(2)(A). As the Ninth Circuit explained, “Federal Rule of Civil Procedure 37 20 authorizes the district court, in its discretion, to impose a wide range of sanctions when a party fails to 21 comply with the rules of discovery or with court orders enforcing those rules.” Wyle v. R. J. Reynolds 22 Indus., Inc., 709 F.2d 857, 589 (9th Cir. 1983) (citing Nat’l Hockey League v. Metro. Hockey Club, 23 Inc., 427 U.S. 639, 643 (1976)). 24 As noted, Defendant requests terminating sanctions for Plaintiff’s failure to comply with the 25 Court’s order directing Plaintiffs to respond to discovery and pay monetary sanctions. (Doc. 63) The 26 Ninth Circuit observed, “A terminating sanction, whether default judgment against a defendant or 27 dismissal of a plaintiff’s action, is very severe,” and “[o]nly willfulness, bad faith, and fault justify 28 terminating sanctions.” Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, 482 F.3d 1091, 3 1 1096 (9th Cir. 2007); see also Computer Task Group, Inc. v. Brotby, 364 F.3d 1112, 1115 (9th Cir. 2 2004) (stating that where “the drastic sanctions of dismissal or default are imposed, . . . the range of 3 discretion is narrowed and the losing party’s noncompliance must be due to willfulness, fault, or bad 4 faith”). The Court is obligated to impose lesser sanctions than dismissal, if feasible. Malone v. U.S. 5 Postal Serv., 833 F.2d 128, 130 (9th Cir. 1987); United States v. Nat'l Medical Enterprises, Inc., 792 6 F.2d 906, 912 (9th Cir.1986) (“The district court abuses its discretion if it imposes a sanction of 7 dismissal without first considering the impact of the sanction and the adequacy of less drastic 8 sanctions.”). 9 III. Discussion and Analysis Failure to comply with the Court’s order 10 A. 11 Finding Plaintiffs failed to timely and properly respond to Defendant’s discovery requests and 12 failed to provide adequate justification for the actions taken, the Court ordered Plaintiffs to pay 13 $4,800 to counsel for the defendant within ten days of the date of service of the order. (Doc. 62 at 14 15-16) In addition, the Court ordered the amended discovery responses to be provided within ten 15 days. (See generally Doc. 62) Therefore, Plaintiffs were required to pay the sanctions and produce 16 the ordered discovery no later than January 8, 2017. 17 18 1. Monetary sanctions Finding Plaintiffs failed to timely and properly respond to Defendant’s discovery requests, 19 and failed to provide adequate justification for the actions taken, the Court ordered Plaintiffs to pay 20 $4,800 to counsel for the defendant within ten days of the date of service of the order. (Doc. 62 at 21 15-16) Therefore, Plaintiffs were required to pay the sanctions no later than January 8, 2017. 22 Plaintiffs requested an extension from Defendants, and were told they had until January 13, 23 2017. (Doc. 63 at 10) Defendant notes that counsel “was initially reluctant to grant the extension 24 because Dhillon had testified in his deposition in December 2016 that he not only had $129,000 in his 25 WestAmerica Bank account, but that he had millions of dollars available to him from various 26 resources.” (Id., citations omitted) As of the date of filling, Defendant’s counsel had not received the 27 money ordered. (Id.) Plaintiffs paid the monetary sanctions owed on February 2, 2017 (Doc. 69 at 2, 28 Dolce Decl. ¶ 4), 25 days after the deadline ordered by the Court. 4 1 2. a. 2 3 Discovery failures Metadata Defendant asserts Plaintiffs failed to “produce[] a single document in compliance with the 4 Court’s Order, much less documents with any metadata.” (Doc. 63 at 10) Previously, the Court 5 noted that Defendant “requested email communications in TIFF format with the corresponding 6 metadata.” (Doc. 62 at 3, citing Doc. 48 at 13) In response, Plaintiff “produced some TIFF- 7 formatted emails but only after they had been forwarded from the subject computer to the office of 8 the former attorney for the plaintiffs,” which resulted in the metadata “‘pertain[ing] to the forwarded 9 versions of the emails to Plaintiffs’ counsel’s paralegal, not the original emails between Plaintiffs and 10 11 12 13 14 15 16 17 18 19 Hancock.’” (Id., quoting Doc. 48 at 9) The Court noted: The defendants argue that the metadata from the native versions of the email is crucial because it appears that the plaintiffs have produced key emails that are changed when compared to the same emails directed to the recipient. (Doc. 48 at 9-10) The defendants assert that emails appear to have been “whited out from Plaintiffs’ versions, and in other instances new and different text has been inserted into Plaintiff’s versions.” Id. at 10. In one example, the defendants direct the Court’s attention to two versions of the same email (Compare 49-2 at 2 with 49-1 at 2). In the plaintiffs’ copy, it states that Hancock’s representative indicate (apparently, when discussing a document related to the sale) that “It’s Acceptable.” (Doc. 49-1 at 2; Doc. 49 at 4) The one produced by Hancock does not have this language. (Doc. 49-2 at 2; Doc. 49 at 4) In a second example, the exact same email sent at the exact same time to the exact same people shows additional content [“on crop and Closing Escrow”] on the plaintiff’s copy (Doc. 49-4 at 2; Doc. 49 at 5) that is not included on the email received by Hancock (49-6 at 2; Doc. 49 at 5). A third example shows the same e-mail with the plaintiffs’ version (Doc. 49-8 at 2; Doc. 49 at 6) having significantly different content than Hancock’s copy. (Doc. 49-9 at 2; Doc. 49 at 6) Notably, Hancock produced all three of these emails with the associated metadata demonstrating, apparently, no alterations by Hancock. (Doc. 49 at 4-6) 20 21 (Doc. 62 at 3-4, footnote omitted) The Court noted Plaintiff did not address the inconsistencies 22 between the emails, and there was a “significant showing” that the metadata was important. (Id. at 4) 23 Thus, the Court granted the motion to compel “as to any request for electronically held documents,” 24 and ordered Plaintiffs to “produce all emails and other documents sought by the defendants in the 25 format demanded with the accompanying metadata from the native computer.” (Id.) 26 Defendant reports that Plaintiffs “failed to produce the documents with metadata, claiming 27 without explanation that they are ‘unable’ to do so.” (Doc. 63 at 7) Plaintiffs’ supplemental discovery 28 response indicated: 5 Any and all requests for production involving corresponding metadata from a native computer, whether in the custody and control of the Plaintiffs or elsewhere, despite reasonable search and effort, and other than what’s already been produced by the Plaintiffs, cannot here now be produced under the deadline set by the Court’s order. 1 2 3 4 (Doc. 65-1 at 2, emphasis added) Plaintiffs did not offer any reason why the metadata in their 5 possession could not be produced, or why they were unable to comply with the Court’s deadline. 6 (See id.) Opposing the motion for sanctions, Plaintiffs simply assert that it “it became evident certain 7 materials were incapable of being produced by the Plaintiffs, in hard-copy or by meta-data, despite 8 their references in the Plaintiffs’ Complaint.” (Doc. 66 at 2) 9 However, as Defendant observes, Dhillon had access to the emails in August and October— 10 when he forwarded emails to his attorney for production— and “he should have access now.” (Doc. 11 63 at 11) There was no explanation why the metadata was “incapable” of being produced. Indeed, 12 at the hearing, Plaintiff’s counsel clarified only that producing the metadata would not support 13 Plaintiff’s version of the altered emails. Whether this is the case, it is off topic. The Court ordered 14 the plaintiff to produce the metadata; it did not require the production only if it supported a particular 15 version of a particular event. Moreover, despite taking this position, counsel admitted that he had not 16 examined the metadata and could not state with certainty exactly what it revealed.1 17 Plaintiffs’ counsel confirmed that his clients have possession of the computers but gave no 18 explanation why the discovery requested was “incapable” of being produced. To the contrary, he 19 indicated that Plaintiffs could produce the computers from which the emails were sent—and objected, 20 though agreed to submit to an order requiring Plaintiffs to produce the physical computers, though the 21 electronic discovery previously ordered was not produced. b. 22 Other documents not produced Previously, Defendant served an interrogatory asking Plaintiff to describe “the method or 23 24 manner used to calculate the amount of [Dhillon’s] damages claim, including, without limitation, any 25 assumptions, conclusions, or methodology used in the calculation.” (See Doc. 62 at 14) In response, 26 Dhillon produced a one-page spreadsheet, but portions of the spreadsheet were “greyed out” and 27 28 1 Given the examples of adulterated evidence discovered by the defendants, it was reasonable for the defendants to want to examine the metadata for the entirety of all documents sought to discover if there was evidence of other adulterated evidence. 6 1 illegible, which Plaintiffs acknowledged. (Id., citing Doc. 48 at 33-34) In addition, the Court noted 2 Plaintiff failed to “provide the documents related to the sale of the collateral properties or, for 3 example, documents demonstrating the income they claim they received in the past as to the six 4 properties.” (Id. at 9) The Court observed, “though Dhillon may no longer have personal possession 5 of these documents, he is obligated to obtain them from those, such as escrow companies, banks, 6 financiers, accountants, etc., over whom he exercises control.” (Id., citing Fed. R. Civ. P. 34(a)(1)) 7 Therefore, the Court ordered Plaintiffs to “provide a legible copy of the spreadsheet within ten days,” 8 as well as documents demonstrating the loss of income for each property was determined. (Id. at 9, 9 14, emphasis added) 10 Defendant also served a request for production of documents that reflected the financial 11 condition of Kern Lerdo and its ability to perform the Purchase and Sale Agreement in August and 12 September 2015. (Doc. 62 at 10) In response to the request, “Dhillon produced an “Annual 13 Customer Statement of Randeep Dhillon for the Period of 05/31/2011 – 06/30/2015 which indicates 14 an Ending Cash Balance: $45,503,672.48 and Total Account Equity: $45,504,915.22.” (Id., quoting 15 Doc. 48 at 25) The Court found this document was “[c]learly… not responsive to the requests,” 16 because “[t]he fact that he had these assets months earlier does not demonstrate he had them on the 17 operative dates.” (Id.) Further, the plaintiff failed “to explain why he simply did not obtain a 18 document from his financial institution demonstrating his financial capability on the dates requested.” 19 (Id. at 10) Therefore, the Court ordered Plaintiffs to “produce all responsive documents,” and if Kern 20 Lerdo did not have any evidence of its ability to complete the sale, then it was ordered to “amend its 21 response to state this.” (Id. at 10-11) 22 In the supplemental discovery response, Plaintiffs reported they were “unable to locate any … 23 [document] other than the summary already produced,” and were “incapable of producing a more 24 legible version” of the spreadsheet. (Doc. 65-1 at 9, 10) Thus, Plaintiffs failed to produce any 25 documents demonstrating their financial ability in August and September 2015 to satisfy the Purchase 26 and Sale Agreement. (Doc. 63 at 7) However, as Defendant observes, it is unclear how Plaintiffs can 27 be incapable of producing a legible version of a spreadsheet they created. Moreover, as Defendant 28 reports, “Dhillon testified at deposition [in December] that he could produce documents regarding his 7 1 2 3 4 calculation of damages: Q: Okay. So did you do some calculations to come up with this [$28,410,327] number [on the spreadsheet]? A: I have it already. I can produce to you later. 5 Q: You should have produced it already. But you’re saying you have some writtendown calculations of how you reached this number? 6 A: Yes. 7 *** Q: Now, with respect to this- all these documents, there’s obviously -- with respect to this attachment you had in your interrogatories, there’s - you mentioned appraisals. There’s mort -- mortgage loans. There’s sale -- There’s sale documents, right, that would have been purchase and sale documents with your sell- your buyers? 8 9 10 A: Yes. 11 Q: And to my knowledge, none of that’s been produced in this case. Do you still have those documents? 12 13 14 A: They were produced to Barry [Jorgensen, Plaintiffs’ former attorney]. No. Not to the— my other attorney previously in September 2015, but I can get more copies. Q: Well, I’m just telling you that they haven’t been produced in this case, and they’re seemingly related to your damages. 15 16 (Doc. 63 at 15, quoting Doc. 65-10 at 14-15, 24-25; Dhillon Depo. 526: 18-527:1, 536:18 - 537:11) 17 (emphasis in original) 18 Despite Dhillon’s testimony under oath that he had the spreadsheet and would be able to 19 produce it to Defendants, and that he could “get more copies” of the financial documents, Plaintiffs 20 now report they have no other responsive documents. Plaintiffs offer no explanation for why the 21 spreadsheet could not be produced—or reproduced—and fail to explain why they were unable to 22 obtain documents from a bank demonstrating their financial ability to complete the purchase of the 23 farm. Plaintiffs also do not affirmatively state that the documents do not exist. (See Doc. 65-1) 24 Consequently, Plaintiffs have failed to comply with the Court’s order to produce the spreadsheet and 25 financial documents supporting their damages calculation. 26 27 28 c. Identification of documents and Bates numbers Previously, the Court ordered Plaintiffs to identify responsive documents by Bates number. (Doc. 62 at 5-7, 9, 11, 13) The Court observed that Plaintiffs asserted they had provided documents 8 1 responsive to several requests for production, but failed to specifically identify the documents. 2 Accordingly, the Court ordered Plaintiffs to “identify by Bates number which documents they intend 3 to respond to these requests.” (See, e.g. id. at 6) 4 In the supplemental response, Plaintiffs asserted they were unable to comply with the Court’s 5 order because “[t]o the Plaintiffs’ knowledge…, any and all responses since produced by Plaintiffs 6 have not yet been identified with Bates number other than electronic metadata already produced and 7 certain documents up to 0000000019.” (Doc. 65-1 at 4) On the other hand, as Defendants observe, 8 “Plaintiffs could have and should have easily either referenced PDF page numbers from their prior 9 productions, or alternatively, reproduced their prior productions with Bates numbers.” (Doc. 63 at 10 19-20) Because Plaintiffs failed to do so, Defendant remained unable to identify the purported 11 responsive “documents ‘previously identified and/ or produced.’” (Id. at 20) The failure of Plaintiffs 12 to identify the documents previously produced through Bates number or otherwise, smacks of 13 gamesmanship and deliberate and willful refusal to comply, if not with the explicit order of the Court 14 than, clearly, with its spirit and intent. 15 16 3. Falsified discovery a. Bank records 17 Defendant contends that it “recently learned that the bank statements that Plaintiffs produced 18 to GPA during the course of discovery in this case (the same statements that Plaintiffs had provided 19 to Hancock as proof of funds in July 2015 during the bid process for the Almond Farm) were 20 fraudulently altered.” (Doc. 63 at 20, footnote omitted) Defendant asserts: 21 22 23 24 25 26 In their October 2016 document production, Plaintiffs produced two documents: (1) a document purporting to be Dhillon’s “May 31, 2011 to June 30, 2015.” “Annual” [sic] ForEx account statement from GAIN Capital showing a total account equity of $45,504,915.22 in Account No. xxxx5786, and (2) a document purporting to be an April 30, 2015 WestAmerica Bank account statement in the name of BealeBti Enterprises, Inc. (one of Dhillon’s various companies) showing a balance of $9,948,011.82, both of which Plaintiffs produced to GPA during the course of discovery. (Exh. 3 at 2; Exh. 5 at 2.) In their discovery responses-most recently, in their January 16, 2017 further supplemental responses to RFPs Nos. 37- 42—Plaintiffs have repeatedly relied on those documents as evidence of their financial condition and ability to perform. (See, e.g., Exh. 13 at 12-15.) 27 (Id. at 21, emphasis in original) Dhillon testified at his deposition that the ForEx account statement 28 was accurate. (Doc. 65-10 at 352:7-9) 9 1 2 3 4 5 6 7 However, in the course of discovery, Defendant “issued records subpoenas to both GAIN Capital and WestAmerica Bank in December 2016.” (Doc. 63 at 21) Defendant reports: GAIN Capital’s document production and the corresponding custodian of records declaration indicate that (1) Dhillon has never had an account with GAIN bearing Account No. xxxx5786, and (2) that Dhillon’s actual GAIN account (Account No. xxxx5736, curiously only two digits different than the account number on the forged statement he produced to GPA) had a balance of only $56.15 on June 30, 2015 (not $45,504,915.22 as his production reflects). (Exhs. 2, 4.) Similarly, WestAmerica Bank’s document production indicates that BealeBti’s WestAmerica account in fact had an overdraft of $512.10 as of April 30, 2015 (not a $9,948,011.82 balance as Plaintiffs’ production reflects). (Exh. 6 at 2.) 8 (Id., emphasis in original) Indeed, Alex Bobinski, a custodian of records for GAIN Capital, reported 9 under penalty of perjury that “GAIN Capital has no records of any Account Number [xxxx]5786 in 10 the name of Randeep Dhillon, and that no such account has ever existed. (Doc. 65-2 at 2, Bobinksi 11 Decl. ¶ 4) Further, the statement that GAIN Capital produced for the period of May 29 to June 30, 12 2015 shows a balance of $56.15. (Doc. 65-4 at 2) Likewise, Jessica Kalenik, a WestAmerica Bank 13 representative, produced “copies of statements dated from 04/01/2015 through 09/30/2015,” and the 14 statement dated April 30, 2015 shows an overdraft of $512.00, while the statement produced by 15 Plaintiffs shows a balance of $9,948,011.82. (Compare Doc. 65-6 at 3 with Doc. 65-5 at 2) 16 The statement produced by Plaintiff for WestAmerica Bank also contains a glaringly obvious 17 evidence of alteration: the balance decreases from $7,129,457.17 on April 1, 2015 to only $30.63 on 18 April 2, yet only shows a withdrawals totaling $70,751.46 on April 1 and $2,000.00 on April 2. 19 (Doc. 65-5 at 2, 7) There is simply no plausible explanation for the balance change of more than 20 $7,120,000 between the two dates in the document produced by Plaintiff. Then again, on April 3, the 21 balance again increases by about $7 million despite no equivalent deposit. 22 In addition, the document curiously identifies the balance of “$7159,560.20”; “3104,471.04”; 23 “3392,922.66”; and “9948,011.82”—with each of the numbers missing a comma to separate the 24 millions from the thousands. This is inconsistent with other portions of the document, which have the 25 commas in the proper places, such as the ending balance of $9,948,011.82. 26 In light of the evidence produced by GAIN Capital and WestAmerica Bank, as well as the 27 obvious alterations in the document produced by Plaintiffs and the absolute refusal of Plaintiffs to 28 explain, the Court finds the evidence overwhelmingly demonstrates that Plaintiffs produced falsified 10 1 bank documents, and testified falsely under oath regarding the authenticity. b. 2 3 Email alterations As discussed above, Plaintiffs previously produced emails that appeared to have been altered, 4 which is why the Court ordered Plaintiffs to produce the emails with metadata. For example, an 5 email “sent at the exact same time to the exact same people shows additional content [“on crop and 6 Closing Escrow”] on the plaintiffs’ version (Doc. 49-4 at 2; Doc. 49 at 5) that was not included on the 7 email received by Hancock (49-6 at 2; Doc. 49 at 5). A second email had significantly different 8 content on Plaintiffs’ version when compared to Hancock’s version. (Doc. 49-8 at 2; Doc. 49 at 6) 9 Notably, Hancock produced each of these emails with the associated metadata demonstrating, 10 apparently, no alterations by Hancock. (Doc. 49 at 4-6) Further, Defendant deposed Plaintiffs’ prior 11 counsel and paralegal, who testified under oath that they did not alter the emails. (Doc. 63 at 8; see 12 also Doc. 65-11 at 5, Franchino Depo. 69: 7-21, 72:4-18, 75:24-77:8; Doc. 65-12 at 7) The only 13 conclusion the Court is left with is that Plaintiffs altered the emails prior to producing the documents 14 to counsel. Indeed, Plaintiffs’ refusal to comply with the Court’s order to produce the metadata for 15 the emails—which would reveal the alterations—strongly suggests this is the correct conclusion. 16 C. 17 “District courts have inherent power to control their dockets,” and in exercising that power, a 18 court may impose sanctions including dismissal of an action. Thompson v. Housing Authority of Los 19 Angeles, 782 F.2d 829, 831 (9th Cir. 1986). A court may dismiss an action with prejudice, based on a 20 party’s failure to obey a court order. See, e.g. Ferdik v. Bonzelet, 963 F.2d 1258, 1260-61 (9th Cir. 21 1992) (dismissal for failure to comply with an order); Malone v. U.S. Postal Service, 833 F.2d 128, 22 130 (9th Cir. 1987) (dismissal for failure to comply with a court order). 23 Terminating Sanctions The Court must consider the following factors in its evaluation of whether to impose a case- 24 dispositive sanction pursuant to Rule 37(b): “(1) the public’s interest in expeditious resolution of 25 litigation; (2) the court’s need to manage its dockets; (3) the risk of prejudice to the party seeking 26 sanctions; (4) the public policy favoring disposition of cases on their merits; and (5) the availability 27 of less drastic sanctions.” Conn. Gen. Life Ins. Co., 482 F.3d at 1096; accord Computer Task Group, 28 364 F.3d at 1115. The Ninth Circuit explained: “Where a court order is violated, the first two factors 11 1 support sanctions and the fourth factor cuts against a default. Therefore, it is the third and fifth factors 2 that are decisive.” Adriana Int’l Corp. v. Thoeren, 913 F.2d 1406, 1412 (9th Cir. 1990). 3 4 1. Public interest and the Court’s docket In the case at hand, the public’s interest in expeditiously resolving this litigation and the 5 Court's interest in managing the docket weigh in favor of dismissal. See Yourish v. Cal. Amplifier, 6 191 F.3d 983, 990 (9th Cir. 1999) (“The public's interest in expeditious resolution of litigation always 7 favors dismissal”); Ferdik, 963 F.2d at 1261 (recognizing that district courts have inherent interest in 8 managing their dockets without being subject to noncompliant litigants). Plaintiffs’ failure to comply 9 with their discovery obligations—even after being ordered by the Court—has consumed scare 10 11 judicial time and resources. Accordingly, these factors support the imposition of sanctions. 2. Prejudice to Defendant 12 To determine whether Defendant has been prejudiced, the Court must “examine whether the 13 plaintiff’s actions impair the ... ability to go to trial or threaten to interfere with the rightful decision 14 of the case.” Malone, 833 F.2d at 131 (citing Rubin v. Belo Broadcasting Corp., 769 F.2d 611, 618 15 (9th Cir. 1985)). 16 The Ninth Circuit has determined that a party’s “[f]ailure to produce documents as ordered . . . 17 is considered sufficient prejudice” supports the issuance of sanctions. Adriana Int’l Corp., 913 F.2d 18 at 1412 (citing Securities & Exch. Comm'n. v. Seaboard Corp., 666 F.2d 414, 417 (9th Cir. 1982)); 19 see also Leon v. IDX Sys. Corp., 464 F.3d 951, 959 (9th Cir. 2006) (prejudice results when a party’s 20 refusal to provide documents forces the other party to rely on incomplete evidence at trial). In this 21 case, as discussed above, Plaintiffs failed to comply with the Court’s orders to produce emails with 22 metadata, to produce responsive documents supporting the damage calculations, and to specifically 23 identify any documents responsive to Defendants’ requests for production. Therefore, this factor 24 favors the imposition of sanctions. 25 3. Availability of less drastic sanctions 26 The Court “abuses its discretion if it imposes a sanction of dismissal without first considering 27 the impact of the sanction and the adequacy of less drastic sanctions.” United States v. Nat’l Medical 28 Enterprises, Inc., 792 F.2d 906, 912 (9th Cir. 1986). However, as the Ninth Circuit explained, “a 12 1 plaintiff can hardly be surprised” by a sanction of dismissal “in response to willful violation of a 2 pretrial order.” Malone, 833 F.2d at 133. Significantly, the Court previously imposed monetary sanctions on Plaintiffs, who failed to 3 4 comply with the deadline ordered by the Court and paid the sanctions more than twenty days later— 5 only doing so after the motion for terminating sanctions was filed. Plaintiffs have demonstrated their 6 willingness to ignore deadlines imposed by the Court, disrupt the course of the litigation, and prepare 7 falsified documents to respond to discovery requests. Such actions demonstrate bad faith and 8 Plaintiffs’ willful abuse of the judicial process and support the issuance of terminating sanctions. See 9 Conn. Gen. Life Ins. Co., 482 F.3d at 1096 (explaining “discovery violations [that] threaten to 10 interfere with the rightful decision of the case” support the imposition of terminating sanctions); see 11 also Professional Seminar Consultants v. Sino Am. Technology Exch. Co., 727 F.2d 1470, 1474 (9th 12 Cir. 1983) (finding the district court did not err in issuing terminating sanctions where the party 13 “willfully, deliberately, and intentionally submitted false documents”). On the other hand, Plaintiffs, through counsel, cleverly suggest the Court merely strike 14 15 portions of the complaint that related to the offending actions. However, as counsel admitted at the 16 hearing, even if these portions were stricken, the substance of the complaint remains because these 17 portions are mere surplusages. This tactic offers no relief to the defendants and no sanction on the 18 plaintiffs. In addition, counsel’s arguments made clear that when the case continues, Plaintiffs intend to 19 20 “vary” their current positions. For example, no longer would they claim there was an executed 21 written purchase agreement and, instead, they would claim there was an accepted oral contract. This 22 would require the defendants to discard all of their discovery efforts and to begin anew, despite the 23 financial burden this imposes. Again, Plaintiffs offer no explanation for why they should be 24 permitted to take new and contrary factual and legal positions. Moreover, even if the Court permitted 25 this tactic, Plaintiffs offer no assurances that the discovery provided by them this time will not be 26 manufactured or that the deposition testimony given this time, would actually be truthful. 27 Consequently, this factor support the imposition of terminating sanctions 28 /// 13 4. 1 Public policy 2 Given Plaintiffs’ failure to comply with the Court’s order, their willful discovery violations 3 and their blatant falsification of evidence, the policy favoring disposition of cases on their merits is 4 outweighed by the factors in favor of dismissal. See Malone, 833 F.2d at 133, n.2 (explaining that 5 although “the public policy favoring disposition of cases on their merits . . . weighs against dismissal, 6 it is not sufficient to outweigh the other four factors”). 7 D. 8 Defendant seeks an award of monetary sanctions in addition to terminating sanctions. (Doc. 9 Monetary Sanctions 63 at 32) Rule 37 provides for an award of monetary sanctions: “The court must order the 10 disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including 11 attorney's fees, caused by the failure, unless the failure was substantially justified or other 12 circumstances make an award of expenses unjust.” Fed. R. Civ. P. 37(b)(2)(C). 13 However, in light of the terminating sanctions recommended, the Court finds the imposition 14 of additional monetary sanctions unjust.2 See Fed. R. Civ. P. 37(b)(2)(C); see also Reddy v. Precyse 15 Solutions LLC, 2015 U.S. Dist. LEXIS 79352 (E.D. Cal. June 18, 2015) (finding the plaintiff willfully 16 refused to comply with discovery orders and imposing terminating sanctions, but denying an "award 17 for further monetary sanctions [as] unjust"); Meador v. Macy's Corporate Servs., 2016 U.S. Dist. 18 LEXIS 128163 (D. Haw. Aug. 26, 2016), adopted by 2016 U.S. Dist. LEXIS 127197 (D. Haw. Sept. 19 16, 2016) (finding "awarding monetary sanctions in addition to terminating sanctions would be 20 unjust"); Townsend v. Ihde, 2015 U.S. Dist. LEXIS 1496 (D.Mon. Jan. 7, 2015) (declining a 21 monetary award where dismissal sanctions were imposed). 22 IV. Findings and Recommendations 23 As set forth above, Plaintiffs failed to comply with the Court’s order granting in part 24 Defendant’s motion to compel discovery. In addition, the production of falsified documents 25 demonstrates Plaintiffs’ bad faith and willful abuse of the judicial process. Accordingly, the Court 26 27 28 2 This does not preclude any defendant from seeking an award of fees and costs in subsequent motion practice. Indeed, had the Court not determined that terminating sanctions is appropriate, it would have imposed a significant monetary sanction. However, for the reasons set forth above, it is clear that imposing monetary sanctions will not correct the conduct that gave rise to this and the earlier motion. 14 1 finds the factors set forth above support the imposition of terminating sanctions, particularly the 2 prejudice caused to Defendant and the unavailability of less drastic sanctions. See Conn. Gen. Life 3 Ins. Co., 482 F.3d at 1096’ Professional Seminar Consultants, 727 F.2d at1474. Based upon the 4 foregoing, the Court RECOMMENDS: 5 1. Defendants’ request for terminating sanctions be GRANTED; 6 2. Defendants’ request for monetary sanctions be DENIED; and 7 3. The action be DISMISSED WITH PREJUDICE. 8 These Findings and Recommendations are submitted to the United States District Judge 9 assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1)(B) and Rule 304 of the 10 Local Rules of Practice for the United States District Court, Eastern District of California. Within 11 fourteen days of the date of service of these Findings and Recommendations, any party may file 12 written objections with the court. Such a document should be captioned “Objections to Magistrate 13 Judge’s Findings and Recommendations.” The parties are advised that failure to file objections 14 within the specified time may waive the right to appeal the District Court’s order. Martinez v. Ylst, 15 951 F.2d 1153 (9th Cir. 1991); Wilkerson v. Wheeler, 772 F.3d 834, 834 (9th Cir. 2014). 16 17 18 19 IT IS SO ORDERED. Dated: February 21, 2017 /s/ Jennifer L. Thurston UNITED STATES MAGISTRATE JUDGE 20 21 22 23 24 25 26 27 28 15

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