U.S. Commodity Futures Trading Commission v. Gramalegui

Filing 283

ORDER Overruling Objections to Recommendation of the United States Magistrate Judge. The magistrate judge's Recommendation Regarding the CFTC's Two Motions (ECF #s 110 & 154) for Sanctions for Defendant's Discovery Violations Pursuant to Rule 37(b)(2)(A) [# 238 ] is approved and adopted as an order of this court. The objections raised in Defendant's Objections to Magistrate's [sic] Regarding the CFTC's Two Motions [ECF #s 110 & 154] for Sanctions for Defendant&# 039;s Discovery Violations Pursuant to Rule 37(b)(2)(A) [# 257 ] are overruled. CFTC's Motion Pursuant to Rule 37(b)(2)(A) for Defendant's Failure To Obey a Discovery Order and Incorporated Memorandum of Law [# 110 ] and CFTC's Second Motion Pursuant to Rule 37(b)(2)(A) for Defendant' s Failure To Obey a Discovery Order [# 154 ] are granted. By Judge Robert E. Blackburn on 08/28/2017. (athom, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Robert E. Blackburn
Civil Case No. 15-cv-02313-REB-GPG
U.S. COMMODITY FUTURES TRADING COMMISSION,
Plaintiff,
v.
GREGORY L. GRAMALEGUI,
Defendant.

ORDER OVERRULING OBJECTIONS TO RECOMMENDATION
OF THE UNITED STATES MAGISTRATE JUDGE
Blackburn, J.
The matter before me is Defendant’s Objections to Magistrate’s [sic]
Regarding the CFTC’s Two Motions [ECF #s 110 & 154] for Sanctions for
Defendant’s Discovery Violations Pursuant to Rule 37(b)(2)(A) [#257],1 filed July 7,
2017, which objects to the magistrate judge’s Recommendation Regarding the
CFTC’s Two Motions (ECF #s 110 & 154) for Sanctions for Defendant’s Discovery
Violations Pursuant to Rule 37(b)(2)(A) [#238], filed June 14, 2017. Although styled
as a “recommendation,” because the magistrate judge suggests the imposition of purely
non-dispositive sanctions, the order comes with the purview of Rule 72(a) rather than
Rule 72(b). See Gomez v. Martin Marietta Corp., 50 F.3d 1511, 1519-20 (10th Cir.

1

“[#257]” is an example of the convention I use to identify the docket number assigned to a
specific paper by the court’s case management and electronic case filing system (CM/ECF). I use this
convention throughout this order.

1995).2 Thus, I may modify or set aside any portion of the order which I find to be
clearly erroneous or contrary to law. FED. R. CIV. P. 72(a). See also Ocelot Oil Corp.
v. Sparrow Industries, 847 F.2d 1458, 1463 (10th Cir. 1988) (under clearly erroneous
standard, court will affirm unless “on the entire evidence” it “is left with the definite and
firm conviction that a mistake has been committed”) (citations and internal quotation
marks omitted). I find no such error in relation to the magistrate judge’s determinations
as to either of these motions.
The substance of the magistrate judge’s order, and of defendant’s corresponding
objections, addresses the more than 2,500 emails defendant produced to the
Commission in October 2016, just before the close of discovery. Although the
Commission had requested such documents some two years prior during the
investigative phase of this proceeding, and moved as early as May 2016 to compel
defendant to provide them. Defendant repeatedly insisted he had produced all
responsive documents in his possession. More than a year ago, the magistrate judge
found otherwise and ordered defendant to specify, inter alia, all email accounts he used,
noting defendant had failed to disclose at least three email accounts. (See Order
Regarding Plaintiff’s Motion To Compel, et al. at 3, 5 [#67], filed July 28, 2016.)3
Included expressly in that listing was the email account from which the late-produced

2

Although the Commission sought dispositive relief, “[t]he penalty to be imposed, rather than the
penalty sought by the movant, controls the scope of the magistrate's authority.” Gomez., 50 F.3d at 1519
(quoting 7 James W. Moore et al., Moore's Federal Practice, ¶ 72.04[2-4], at 72-66 (2nd ed. 1994))
(internal quotation marks omitted).
3

Given this clear directive from the court, defendant’s suggestion that the Commission did not
request these emails until October 2016 (thus creating the impression that he promptly responded), does
nothing to enhance his credibility.

2

emails were produced.
Against this backdrop, defendant’s claim that he serendipitously found these
emails some three months after the magistrate judge ordered him to produce them, just
as the discovery period was sunsetting, strains credulity. I discern no error, much less
clear error, in the magistrate judge’s conclusion that defendant’s protestations of
innocence in this regard are feckless. The magistrate judge’s finding that defendant
willfully failed to comply with his discovery obligations is more than amply supported by
his actions in this instance and throughout the prosecution of this case, as amply shown
by the record. The magistrate judge has come by his evident exasperation with
defendant’s behavior honestly. The magistrate judge has been in the trenches, ably
assisting the court in resolving the repeated, difficult, and time-consuming discovery
disputes that have plagued this litigation. Even a relatively superficial reading of the
cold record demonstrates defendant’s reputation for dilatoriness, obsfucation, and
dissembling in his approach to discovery in this case is well-earned.4 The magistrate
judge certainly was permitted to consider the entirety of defendant’s recalcitrant
behavior in deciding whether – and what type of – sanctions were appropriate.5

4

Defendant’s attempt, yet again, to inject at this stage the opinion of a psychologist purportedly
attesting to the sincerity of his insistence that he is not intentionally mendacious but simply disorganized
and careless is both improper procedurally and irrelevant substantively, as previously laid out in my Order
Re: Objections to Recommendation of United States Magistrate Judge at 6 n.4 [#280], filed August
18, 2017.
5

Similarly, defendant’s wholly unsubstantiated suggestion that the Commission has not been
prejudiced by his woefully belated production of the responsive emails does not bear scrutiny. “Obviously,
if a party is dishonest in discovery, he deprives the other side of the ability to meaningfully evaluate the
case on an ongoing basis. It is not acceptable to conclude that because withheld information is eventually
produced, it is ‘no harm, no foul.’” Tom v. S.B., Inc., 280 F.R.D. 603, 618 n.7 (D.N.M. 2012). Moreover,
even though the 170 new emails included in the production were a relatively small fraction of the number
actually produced, in terms of potential relevant violations, they are hardly insignificant.

3

The existence of that same discretion undermines defendant’s argument that
monetary sanctions cannot be imposed because the Commission only sought such
sanctions with respect to its first motion to compel, which did not address the email
dump (which occurred only after the motion had been filed). I reject this hypertechnical
parsing of the duties imposed by – and the court’s authority to sanction the violation of a
party’s duties under – the Federal Rules of Civil Procedure. Rule 37(b)(2)(A) gives the
court a broad arsenal of tools to address a party’s failure “to obey an order or permit
discovery.” These include (but are not limited to) monetary sanctions. See FED. R. CIV.
P. 37(b)(2)(C).6 Nothing in the rule limits a court from employing a sanction
appropriately tailored to the nature and scope of the discovery violation it has found. It
certainly could have been no surprise to defendant that monetary sanctions were on the
table, since the Commission requested them in connection with a related discovery
motion. I therefore find no error in the magistrate judge’s determination that defendant
should be required to pay the Commission’s reasonable attorney fees and costs
incurred in bringing these two discovery motions.
THEREFORE, IT IS ORDERED as follows:
1. That the magistrate judge’s Recommendation Regarding the CFTC’s Two
Motions (ECF #s 110 & 154) for Sanctions for Defendant’s Discovery Violations
Pursuant to Rule 37(b)(2)(A) [#238], filed June 14, 2017, is approved and adopted as
an order of this court;

6

The Commission requested, and the magistrate judge addressed, the imposition of a monetary
sanction under the rubric of criminal contempt. Although Rule 37(b) does contemplate contempt orders,
see FED. R. CIV. P. 37(b)(2)(A)(vii), because a finding of and sanction for criminal contempt raises
complex due process issues, I find it more appropriate to anchor the magistrate judge’s authority to
impose monetary sanctions in Rule 37(b)(2)(C).

4

2. That the objections raised in Defendant’s Objections to Magistrate’s [sic]
Regarding the CFTC’s Two Motions [ECF #s 110 & 154] for Sanctions for
Defendant’s Discovery Violations Pursuant to Rule 37(b)(2)(A) [#257], filed July 7,
2017, are overruled;
3. That The CFTC’s Motion Pursuant to Rule 37(b)(2)(A) for Defendant’s
Failure To Obey a Discovery Order and Incorporated Memorandum of Law [#110],
filed October 21, 2016, is granted;
4. That The CFTC’s Second Motion Pursuant to Rule 37(b)(2)(A) for
Defendant’s Failure To Obey a Discovery Order [#154], filed February 1, 2017, is
granted;
5. That the Commission may use the emails disclosed in November 2016 for any
purpose at trial and that defendant may not make any evidentiary objections to their
use;
6. That the Commission shall be awarded the reasonable attorney fees and
costs incurred in bringing these two discovery motions; and
7. That as previously ordered by the magistrate judge, defendant shall have until
September 11, 2017, to respond to The CFTC's Calculation of Costs in Accordance
with Scheduling Order [#221] [#231], filed May 25, 2017.7

7

The magistrate judge’s resolution of the amount of attorney fees to be awarded is a nondispositive matter as to which he may enter an order, rather than issuing a recommendation. See
Hutchinson v. Pfeil, 105 F.3d 562, 566 (10th Cir.), cert. denied, 118 S.Ct. 298 (1997); Cache La Poudre
Feeds, LLC v. Land O’Lakes, Inc., 244 F.R.D. 614, 616 n.2 (D. Colo. 2007).

5

Dated August 28, 2017, at Denver, Colorado.
BY THE COURT:

6