CYMA (U.S.A.) LTD. et al v. Lumondi, Inc. et al

Filing 89

ORDER Granting 71 Defendants' Motion for Sanctions AND REPORT AND RECOMMENDATION That Plaintiffs' Claims be Dismissed by Magistrate Judge Edward M. Chen. Deadline of 5/3/2011 for Objections to Report & Recommendation. (emcsec, COURT STAFF) (Filed on 4/19/2011) Modified on 4/19/2011 (emcsec, COURT STAFF).

1
2
3
4
5

UNITED STATES DISTRICT COURT

6

NORTHERN DISTRICT OF CALIFORNIA

7
8

CYMA (U.S.A.) LTD., et al.,

9

Plaintiffs,
v.

11
For the Northern District of California

United States District Court

10

Case No. C-09-2802 MHP (EMC)

LUMONDI, INC., et al.,

12

Defendants.
___________________________________/

13

ORDER GRANTING DEFENDANTS’
MOTION FOR SANCTIONS AND
REPORT AND RECOMMENDATION
THAT PLAINTIFFS’ CLAIMS BE
DISMISSED
(Docket Nos. 71, 78)

LUMONDI, INC., et al.,
14
Counter-Claimants,
15
v.
16
CYMA (U.S.A.) LTD., et al.,
17
18

Counter-Defendants.
___________________________________/

19
20

Pending before the Court is a motion for sanctions filed by Defendants and Counter-

21

Claimants Lumondi, Inc. (“Lumondi”) and Mondaine Watch Ltd. (“Mondaine”) (referred to as

22

“Lumondi and Mondaine”) against Plaintiffs and Counter-Defendants Cyma (U.S.A.) Ltd. (“Cyma

23

USA) and Cyma, S.A. (“Cyma Swiss”) (collectively referred to as “Cyma”). Also before the Court

24

is Judge Patel’s Order to Show Cause (Docket No. 78) as to why:

25

(1) Cyma’s claims against Lumondi and Mondaine should not be dismissed;

26

(2) A default judgment should not be entered against Cyma in favor of Lumondi and

27
28

Mondaine on their counter-claims; and
(3) Such other relief as requested in any further motions which are filed, including

1
2

any motions for sanctions, should not be granted.
For the reasons set forth below, the Court hereby GRANTS Lumondi and Mondaine’s

3

motion and dismisses Cyma’s claims and recommends entry of default against Cyma on Lumondi

4

and Mondaine’s counterclaims.

5
6

I.

FACTUAL AND PROCEDURAL BACKGROUND

This case arose from a dispute over a “Term Sheet” signed on June 25, 2008. Lumondi and

7

Mondaine claimed that they were owed $64,000 pursuant to that agreement. Cyma disagreed,

8

claiming that Lumondi and Mondaine were not owed anything because they had failed to perform.

9

At that time, Lumondi and Mondaine was in possession of $3.5 million worth of Cyma’s watches
and had indicated that it would sell those watches at an auction to recoup the sums that Lumondi and

11
For the Northern District of California

United States District Court

10

Mondaine claimed were owed to them.

12

On June 23, 2009, Cyma filed a complaint and motion for preliminary injunction to prevent

13

the auction. A Stipulation was signed on June 25, 2009, in which Cyma agreed to allow Lumondi

14

and Mondaine to hold onto watches with a retail value of $128,000, twice the value of the claim by

15

Lumondi and Mondaine against Cyma. (Docket No. 11). Since June 2009, the parties have

16

attempted, unsuccessfully, to settle this case. A mandatory settlement conference (“MSC”) was held

17

before Geoffrey Howard on February 8, 2010 but the two sides were unable to reach an agreement.

18

On July 23, 2010, Magistrate Judge Elizabeth Laporte issued an Order setting a MSC for September

19

3, 2010. (Docket No. 53). That MSC was thereafter rescheduled for September 16, 2010. (Docket

20

No. 54). On September 15, 2010, Judge Laporte issued an Order moving the MSC to December 2,

21

2010. (Docket No. 59). On November 8, 2010, counsel for Cyma, Cotchett, Pitre & McCarthy,

22

LLP, (“CPM”) filed a Motion to Withdraw. On November 9, 2010, CPM filed an Amended Motion

23

to Withdraw. (Docket Nos. 60-63).

24

On November 17, 2010, Judge Laporte issued an Order moving the MSC to December 9,

25

2010 and requiring that either Didier Roesti or Franchoise Schurch appear in person at the MSC on

26

behalf of Cyma. (Docket No. 65). According to counsel for Lumondi and Mondaine, Cyma was

27

sent a copy of Judge Laporte’s order and were informed of the mandate that Mr. Roesti or Ms.

28

Schurch appear at the MSC. On December 9, 2010, Judge Laporte held the MSC. Steven N.

2

1

Williams of CPM appeared as counsel for Cyma. However, no representative from Cyma USA or

2

Cyma Swiss appeared, in violation of Judge Laporte’s order.

3

On January 10, 2011, Judge Patel held a hearing on CPM’s motion to withdraw as counsel

4

for Cyma. That hearing was not attended by a Cyma representative. On January 13, 2011, Lumondi

5

and Mondaine served the pending Motion for Sanctions for the nonappearance of a Cyma

6

representative. (Docket Nos. 71-76). In response to that motion and “the failure of Cyma USA and

7

Cyma Swiss to cooperate with their counsel of record, their failure to appear at the January 10, 2011

8

hearing on CPM’s Motion to Withdraw, and their failure to appear at court-ordered hearings and

9

conferences,” Judge Patel issued an Order to Show Cause (Docket No. 78) as to why:
(1) Cyma’s claims against Lumondi and Mondaine should not be dismissed;

11
For the Northern District of California

United States District Court

10

(2) A default judgment should not be entered against Cyma in favor of Lumondi and

12

Mondaine on their counter-claims; and

13
14

(3) Such other relief as requested in any further motions which are filed, including any
motions for sanctions, should not be granted.

15

The Court thereafter scheduled a hearing for February 28, 2011. Docket No. 78. The Court

16

thereafter granted CPM’s motion to withdraw. It continued the hearing on the motion for sanctions

17

and the order to show cause, and referred those matters to the undersigned. On March 30, 2011, this

18

Court held a hearing on the pending motions. Cyma filed no substantive opposition to the pending

19

motion or OSC. Nor had Cyma retailed counsel. Charles Palella, corporate counsel for Cyma, did

20

not file an appearance in this case, but participated by telephone and stated that Cyma was

21

attempting to retain counsel. However, Cyma provided no admissible evidence or sworn statement

22

supporting its eleventh hour request to delay ruling until Cyma retains new counsel.

23

II.

24

A.

DISCUSSION

Motion for Sanctions

25

Lumondi and Mondaine seek sanctions in the sum of $10,971.60 pursuant to Fed. R. Civ. P.

26

16(f) and Civil Local R. 1-4. Defendants claim that this is the amount expended on fees and costs to

27

prepare and attend the December 9, 2010 MSC held by Judge Laporte.

28

3

1

Without a client representative, the settlement conference was futile. Cyma violated Judge

2

Laporte’s orders of September 15, 2010 and November 17, 2010. These orders constitute scheduling

3

orders under Rule 16(f). In response to the motion for sanctions, Cyma does not dispute that they

4

committed sanctionable misconduct, but request only that the Court “require that counsel for

5

Lumondi and Mondaine submit time records supporting their claim for monetary sanctions.” Pl.’s

6

Resp. at 5 (Docket No. 79). Courts have upheld the award of sanctions in these circumstances. See

7

Official Airline Guides, Inc. v. Mindy Goss, et. al., 6 F.3d 1385, 1396 (9th Cir. 1993) (upholding

8

order requiring the defendant to pay attorney’s fees and costs for failing to comply with an order

9

requiring attendance, at a settlement conference, by someone with settlement authority) (citing Ford
v. Alfaro, 785 F.2d 835, 839 (9th Cir. 1986)); Guru Denim, Inc. v. Hayes, 2010 U.S. Dist. LEXIS

11
For the Northern District of California

United States District Court

10

52992 (C.D. Cal. May 5, 2010) (holding that the defendants “are entitled to the expenses they

12

incurred in preparing for and traveling to the Pretrial Conference” where plaintiff’s counsel was

13

unprepared and had misplaced and important piece of evidence).

14

In support of their motion, Defendants provide Declarations from Tad A. Devlin and Edward

15

J. Rodzewich, attorneys for Defendants, as well as Max Robertson, Director of U.S. Operations for

16

Lumondi. (Docket Nos. 72-74). The Court finds these declarations to be sufficient to establish the

17

fees and costs reasonably expended by Defendants on the December 9, 2010 MSC. The Court

18

therefore grants Defendants’ motion for monetary sanctions in the amount of $10,971.

19

B.

Order to Show Cause

20

As noted above, on January 21, 2011, Judge Patel ordered Cyma to show cause as to why (1)

21

their claims against Lumondi and Mondaine should not be dismissed; (2) a default judgment should

22

not be entered against them on Lumondi and Mondaine’s counterclaims; and (3) other relief as

23

requested, e.g., in the motion for sanctions, should not be granted. Docket No. 78. Federal Rule of

24

Civil Procedure 16(f) provides that the Court may on motion or on its own issue any sanction

25

authorized by Rule 37(b)(2)(A)(ii)-(vii), if a party “is substantially unprepared to participate-or does

26

not participate in good faith-in the conference” or “fails to obey a scheduling or other pretrial order.”

27

Schudel v. Searchguy.com, Inc., 2010 U.S. Dist. LEXIS 47125 (S.D. Cal. May 12, 2010) (striking

28

the defendant’s answer and counterclaims and entering default judgment in favor of the plaintiff due

4

1

to the defendant’s repeated failure to obey court orders and failing to appear for a pretrial

2

conference). See also Fed. R. Civ. P. 16(f)(1). The court may therefore dismiss the action in whole

3

or in part, or render a default judgement against the disobedient party. See Fed. R. Civ. P.

4

37(b)(2)(A)(v), (vi); Malone v. U.S. Postal Service, 833 F.2d 128 (9th Cir. 1978) (“A plaintiff can

5

hardly be surprised by a harsh sanction in response to willful violation of a pretrial order. Rules

6

16(f) and 41(b) explicitly state that dismissal may be ordered for violation of a court order.”); Guru

7

Denim, Inc. v. Hayes, 2010 U.S. Dist. LEXIS 52992 (C.D. Cal. May 5, 2010) (dismissing action and

8

awarding costs incurred pursuant to Rule 16(f) where plaintiff’s counsel was unprepared for a

9

pretrial conference and misplaced and important piece of evidence).
In deciding whether to issue case-dispositive sanctions under Rule 37(b)(2), the Court

11
For the Northern District of California

United States District Court

10

considers five factors: “(1) the public’s interest in expeditious resolution of litigation; (2) the court’s

12

need to manage its dockets; (3) the risk of prejudice to the party seeking sanctions; (4) the public

13

policy favoring disposition of cases on their merits; and (5) the availability of less drastic sanctions.”

14

Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, 482 F.3d 1091, 1096 (9th Cir. 2007)

15

(quoting Valley Eng’rs v. Electric Eng’g Co., 158 F.3d 1051, 1057 (9th Cir. 1998)). “Not all five

16

factors need necessarily be satisfied, and the test is not to be applied in a mechanical way.” Guru

17

Denim, supra, 2010 U.S. Dist. LEXIS 52992 at *6-7 (citing Conn. Gen. Life Ins. Co., 482 F.3d at

18

1096).

19

The first three factors weigh heavily in favor of a case-dispositive sanction. According to

20

Lumondi and Mondaine, Cyma repeatedly flouted the court’s Civil Local Rules in its Case

21

Management Statements by repeatedly including argument couched as “background facts,” over

22

Lumondi and Mondaine’s objection. See Docket Nos. 46, 50 (Case Management Statements

23

indicating noncompliance with Local Civ. R. 16-10(d), which requires that a statement discuss only

24

developments subsequent to the last statement). Cyma’s prior counsel CPM indicated that they had

25

spent months unsuccessfully attempting to get their clients to cooperate. Mot. to Withdraw at 2.

26

Cyma requested and received a continuance of the MSC. Despite two continuances, a Cyma

27

representative failed to attend the MSC in direct violation of Judge Laporte’s order. Cyma likewise

28

failed to respond or send a representative to the hearing on CPM’s motion to withdraw. It also failed

5

1

to respond to the order to show cause or retain new counsel. Cyma’s first appearance throughout

2

these recent proceedings was to have its corporate counsel participate by telephone at the March 30

3

hearing herein. Even then counsel made clear he was not making an official appearance on behalf of

4

Cyma. Cyma presented no admissible evidence it was actively seeking to retain counsel. Cyma has

5

thus thwarted the public’s interest in expeditious resolution of litigation and the Court’s ability to

6

manage its dockets. Lumondi and Mondaine have suffered prejudice in having to defend this suit

7

prolonged by Cyma’s actions.

8
9

Although the fourth and fifth factors generally tend to weigh against a case-dispositive
sanction, they are not enough to countervail the weight of the first three here. Indeed, the fourth
factor is essentially neutral, as there is little reason to expect that this case would end in a resolution

11
For the Northern District of California

United States District Court

10

on the merits rather than a default judgment, as Cyma has repeatedly failed to comply with Court

12

orders. An unsworn statement that Cyma will obtain new counsel, made by Cyma’s corporate

13

counsel who refused to enter an appearance, is too speculative to assuage this concern. Absent

14

evidence of exceptional circumstances, the Court cannot countenance Plaintiffs’ repeated disregard

15

for the Court’s orders. See Malone, 833 F.2d at 129 (9th Cir. 1978) (“A plaintiff can hardly be

16

surprised by a harsh sanction in response to willful violation of a pretrial order.”).

17
18

III.

CONCLUSION AND RECOMMENDATION

For the reasons stated above, the Court hereby GRANTS Defendants’ Motion for Sanctions.

19

The Court accordingly ORDERS that Defendants are awarded monetary sanctions of $10,971,

20

representing Defendants’ attorneys fees and costs in appearing for the December 9, 2010 settlement

21

conference. Plaintiffs shall remit payment in full to Defendants’ counsel within thirty (30) days or

22

face further sanctions.

23

The Court RECOMMENDS that (1) Cyma’s claims against Lumondi and Mondaine be

24

dismissed with prejudice and (2) the Court order an entry of default against Cyma on Lumondi and

25

Mondaine’s counterclaim pursuant to Rules 16(f) and 37(b)(2)(A)(vi). Should the Court adopt this

26

recommendation, Lumondi and Mondaine may then move for entry of default judgment and prove

27

damages and entitlement to costs or fees accordingly. See Reply at 3 (stating that $64,000 figure “is

28

not current and has increased”).

6

1

Any party may file objections to this report and recommendation with the district judge

2

within fourteen days after being served with a copy. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P.

3

72(b); Civil L.R. 72-3.

4

This order disposes of Docket No. 71.

5
6

IT IS SO ORDERED.

7
8

Dated: April 19, 2011
_________________________
EDWARD M. CHEN
United States Magistrate Judge

9

11
For the Northern District of California

United States District Court

10

12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

7