BRITT INTERACTIVE LLC et al v. A3 MEDIA LLC et al
ORDER ADOPTING REPORT AND RECOMMENDATIONS for 257 Report and Recommendations, 210 Motion for Default Judgment filed by TOM BRITT, BRITT INTERACTIVE LLC, JEANNE BRITT, TOWNEPOST NETWORK INC. See order for details. Signed by Judge Tanya Walton Pratt on 3/5/2018. (MEJ)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
BRITT INTERACTIVE LLC, and
TOWNEPOST NETWORK INC.,
Plaintiffs and Counterclaim Defendants,
A3 MEDIA LLC, COLLECTIVE
PUBLISHING LLC, YELENA LUCAS, NEIL
LUCAS, JANELLE MORRISON, CHILLY
PANDA MEDIA, LLC, DANN VELDKAMP,
and JODY VELDKAMP,
Defendants, Counterclaimants and Third
TOM BRITT, JEANNE BRITT, JOSHUA
BROWN, and TONI FOLZENLOGEL,
Third Party Defendants.
) Case No. 1:16-cv-02884-TWP-DML
ORDER ADOPTING MAGISTRATE JUDGE’S REPORT
AND RECOMMENDATION (DKT. 257)
This matter is before the Court on a Motion for Default Judgment filed by Plaintiffs, Britt
Interactive, LLC and Townepost Network, Inc., and Third-Party Defendants, Tom Britt and Jeanne
Britt (collectively, the “Britt Parties”) (Filing No. 210). On August 23, 2017, the Magistrate Judge
issued a Report and Recommendation, pursuant to Federal Rule of Civil Procedure 72 and 28
U.S.C. § 636(b)(1), that the Court deny the Britt Parties’ Motion for Default Judgment against
Defendants/Counterclaimants/Third-Party Plaintiffs, A3 Media LLC, Collective Publishing LLC,
Yelena Lucas, and Neil Lucas (collectively, the “Lucas Parties”) (Filing No. 257). Plaintiffs, Britt
Interactive, LLC and Townepost Network, Inc., (collectively, the “Plaintiffs”) objected to the
Magistrate Judge’s Report and Recommendation, contending that the Lucas Parties’ continued
abuses of the discovery process warrant an entry of default judgment against them and that the
Magistrate Judge’s recommendation leaves the Britt Parties without any remedy for the Lucas
Parties’ clear discovery misconduct (Filing No. 261). For the following reasons, the Court
OVERRULES the Plaintiffs’ Objection and ADOPTS the Magistrate Judge’s Report and
Recommendation to deny the Britt Parties’ Motion for Default Judgment.
Plaintiffs initiated this action against the Lucas Parties on September 23, 2016, in Hamilton
County, Indiana state court and alleged several claims, including breach of contract, tortious
interference with contracts, and trademark infringement (Filing No. 3-2). On October, 24, 2016,
the Lucas Parties removed this case to this Court based on federal question jurisdiction under the
Lanham Act (Filing No. 3).
In light of several disputes that arose between the parties during the discovery process, the
Britt Parties filed a Motion to Compel on January 27, 2017, requesting that the Court compel the
Lucas Parties to provide substantive responses to the Plaintiffs’ interrogatories and requests for
production, and to reimburse the Britt Parties for attorneys’ fees they incurred in connection to the
Lucas Parties’ discovery misconduct (Filing No. 130). On April 26, 2017, the Magistrate Judge
issued an order granting the Britt Parties’ Motion to Compel (the “Discovery Order”) (Filing No.
196). Specifically, the Magistrate Judge found that the Lucas Parties had not made a sufficient
effort to respond to the Plaintiffs’ discovery requests and ordered the Lucas Parties to supplement
their discovery responses by May 17, 2017 (Filing No. 196 at 3-10). The Magistrate Judge further
required the Lucas Parties to pay the Plaintiffs’ attorneys’ fees incurred “in (a) communicating
with the Lucas Parties about their [discovery] responses ... and (b) filing and briefing their motion
to compel” (Filing No. 196 at 5-6).
In an effort to comply with the Discovery Order, the Lucas Parties sent a supplemental
document production to the Britt Parties on the evening of May 17, 2017 (Filing No. 211 at 5).
The Lucas Parties intended to deliver their supplemental document production by including a
Google Docs weblink to their document production in an email to the Britt Parties’ counsel;
however, the Britt Parties were unable to open the weblink (Filing No. 211 at 6-7). The Britt
Parties informed the Lucas Parties that they could not open the weblink at approximately 1:10 a.m.
on May 18, 2017, and the Lucas Parties sent a new, functional weblink to their supplemental
document production at approximately 1:23 a.m. that same morning (Filing No. 211 at 7-8).
Additionally, despite already delivering its supplemental document production, the Lucas
Parties filed a Motion for Extension of Time on May 17, 2017, requesting a one-day extension to
fully comply with the Discovery Order’s requirements pertaining specifically to their interrogatory
responses (Filing No. 204). On May 18, 2017, the Lucas Parties filed two amended motions for
extensions of time (Filing No. 205; Filing No. 206). In its first Amended Motion for Extension of
Time to Comply with Court’s Order on Motion to Compel, the Lucas Parties requested that they
have until noon on May 18, 2017 to comply with the Discovery Order (Filing No. 205). Later that
day, the Lucas Parties filed their Second Amended Motion for an Extension of Time to Comply
with Court’s Order on Motion to Compel and Motion to Withdraw Appearance, in which the Lucas
Parties requested the Court (1) withdraw the appearance of their attorney, P. Adam Davis; (2)
allow them thirty days to find new counsel; and (3) grant them a two-week extension starting the
day their new counsel appears to comply with the Discovery Order (Filing No. 206).
Before the Court ruled on the Lucas Parties’ motions for extensions of time, the Britt Parties
filed their Motion for Default Judgment on May 22, 2017 (Filing No. 210). The Britt Parties
asserted that default judgment against the Lucas Parties is appropriate pursuant to Federal Rule of
Civil Procedure 37 and the Court’s inherent authority because the Lucas Parties participated in a
pattern of discovery abuses and failed to comply with the Discovery Order (Filing No. 210; Filing
No. 211 at 14-17). The Britt Parties further argue that they are entitled to recover the attorneys’
fees they incurred by reviewing the Lucas Parties’ supplemental document production and filing
their Motion for Default Judgment from the Lucas Parties (Filing No. 211 at 18).
On June 12, 2017, the Magistrate Judge granted the Lucas Parties’ Second Amended
Motion for an Extension of Time to Comply with Court’s Order on Motion to Compel and Motion
to Withdraw Appearance and allowed the Lucas Parties until June 30, 2017 to comply with the
Discovery Order (Filing No. 219). The Lucas Parties opposed the Britt Parties’ Motion for Default
Judgment, claiming that they made a good faith attempt to comply with the Discovery Order, that
they provided additional supplemental discovery responses since the Britt Parties filed their
Motion for Default Judgment, and that default judgment is too severe a sanction in this instance
(Filing No. 240). The Britt Parties further acknowledged that it received additional discovery
responses from the Lucas Parties after filing its initial Motion for Default Judgment in their Reply
in Support of their Motion for Default Judgment (Filing No. 252 at 5).
On August 23, 2017, the Magistrate Judge entered its Report and Recommendation
regarding the Britt Parties’ Motion for Default Judgment (Filing No. 257). In its Report and
Recommendation, the Magistrate Judge advised the Court to deny the Britt Parties’ Motion for
Default Judgment because: (1) Third-Party Defendants, Tom Britt and Jeanne Britt, did not serve
any discovery on the Lucas Parties that was subject to the Discovery Order; (2) the Britt Parties
filed their Motion for Default Judgment before receiving and reviewing all of the Lucas Parties’
supplemental discovery responses; and (3) default judgment is too extreme of a remedy for the
Lucas Parties’ non-compliance with the Discovery Order (Filing No. 257). The Britt Parties now
object to the Magistrate Judge’s Report and Recommendation because the Lucas Parties have
continuously abused the discovery process and because the Magistrate Judge acknowledged
deficiencies in the Lucas Parties’ discovery responses required by the Discovery Order but left the
Britt Parties without any remedy to cure these deficiencies (Filing No. 261). The Lucas Parties
oppose the Britt Parties’ objection and argue that they have worked to provide sufficient responses
to the Plaintiffs’ discovery requests and that the Britt Parties have not been sufficiently prejudiced
by any deficiencies in their discovery responses to warrant an entry of default judgment against
them (Filing No. 264).
II. LEGAL STANDARD
A district court may assign dispositive motions to a magistrate judge, in which case the
magistrate judge may submit to the district judge only a report and recommended disposition,
including any proposed findings of fact. Schur v. L.A. Weight Loss Ctrs., Inc., 577 F.3d 752, 760
(7th Cir. 2009). See 28 U.S.C. § 636(b)(1)(B); Fed. R. Civ. P. 72(b). “The magistrate judge’s
recommendation on a dispositive matter is not a final order, and the district judge makes the
ultimate decision to adopt, reject, or modify it.” Schur, 577 F.3d at 760. See 28 U.S.C. §
636(b)(1)(B); Fed. R. Civ. P. 72(b)(3). After a magistrate judge makes a report and
recommendation, either party may object within fourteen days. 28 U.S.C. § 636(b)(1); Fed. R.
Civ. P. 72(b)(2). “A judge of the court shall make a de novo determination of those portions of
the report or specified proposed findings or recommendations to which objection is made.” 28
U.S.C. § 636(b)(1). Further, a judge “may accept, reject, or modify, in whole or in part, the
findings or recommendations made by the magistrate judge.” Id.
Default Judgment under Federal Rule of Civil Procedure 37
Pursuant to Federal Rule of Civil Procedure 37(b)(2), district courts have the power to
impose appropriate sanctions for discovery violations. e360 Insight, Inc. v. Spanhaus Project, 658
F.3d 637, 642 (7th Cir. 2011).
Courts are given “wide latitude in fashioning appropriate
sanctions,” but the sanctions must be reasonable under the circumstances. Id. (internal quotations
omitted). If a party fails to obey a court order to provide discovery, a court may enter “further just
orders,” such as “rendering a default judgment against the disobedient party.” Fed. R. Civ. P.
37(b)(2)(A). Although there are no specific factors that a court must analyze to impose sanctions
under Rule 37, courts generally consider the egregiousness of the conduct by evaluating “the
frequency and magnitude of the party’s failure to comply with court deadlines, the effect of these
failures on the court’s time and schedules, the prejudice to other litigants, and the possible merits
of the plaintiff’s suit.” Rice v. City of Chicago, 333 F.3d 780, 784 (7th Cir. 2003) (internal
quotation marks omitted); see also, Dotson v. Bravo, 321 F.3d 663, 667 (7th Cir. 2003). Due to
its extreme severity, default judgment is an appropriate sanction “only where there is a clear record
of delay or contumacious conduct, where other less drastic sanctions have proven unavailing, or
where a party displays willfulness, bad faith, or fault.” Domanus v. Lewicki, 742 F.3d 290, 301
(7th Cir. 2014) (internal citations and quotation marks omitted).
Additionally, “a court has the inherent authority to manage judicial proceedings and to
regulate the conduct of those appearing before it, and pursuant to that authority may impose
appropriate sanctions to penalize and discourage misconduct.” Ramirez v. T&H Lemont, Inc., 845
F.3d 772, 776 (7th Cir. 2016). “Any sanctions imposed pursuant to the court’s inherent authority
must be premised on a finding that the culpable party willfully abused the judicial process or
otherwise conducted the litigation in bad faith.” Id. (citing Chambers v. NASCO, Inc., 501 U.S.
32, 46-50 (1991); Secrease v. W. & S. Life Ins. Co., 800 F.3d 397, 401 (7th Cir. 2015); Trade Well
Int’l v. United Cent. Bank, 778 F.3d 620, 626 (7th Cir. 2015)). The Seventh Circuit “make[s] clear
that it is a residual authority, to be exercised sparingly, to punish misconduct (1) occurring in the
litigation itself …, and (2) not adequately dealt with by other rules.” Zapata Hermanos Sucesores,
S.A. v. Hearthside Baking Co., Inc., 313 F.3d 385, 391 (7th Cir. 2002).
To grant a default judgment pursuant to either Rule 37 or the court’s inherent authority, the
court must, “find that the responsible party acted or failed to act with a degree of culpability that
exceeds simple inadvertence or mistake before it may choose dismissal as a sanction for discovery
violations.” Ramirez, 845 F.3d at 776. “[T]he facts underlying a district court’s decision to dismiss
the suit or enter a default judgment as a sanction under Rule 37 or the court’s inherent authority
need only be established by a preponderance of the evidence.” Id. at 781.
The Court agrees with the Magistrate Judge that the extreme sanction of default judgment
is not warranted in this instance based on the facts surrounding the Lucas Parties’ discovery
misconduct. This is especially true because the Britt Parties moved for default judgment before
the Court had the opportunity to rule on the Lucas Parties’ motions for extensions of time and
before they received all of the Lucas Parties’ supplemental discovery responses pursuant to the
Discovery Order. Therefore, pursuant to 28 U.S.C. § 636(b)(1), the Britt Parties’ Objections to
the Magistrate Judge’s Report and Recommendation is OVERRULED, and the Court ADOPTS
the Magistrate Judge’s Report and Recommendation to deny the Britt Parties’ Motion for Default
Judgment. However, because the Magistrate Judge acknowledges that it was “evident” the Lucas
Parties did not fully comply with the Discovery Order (Filing No. 257 at 5), the Court would
entertain a petition for attorney’s fees from the Britt Parties in relation to their review of the Lucas
Parties’ supplemental discovery responses and their Motion for Default Judgment.
As stated in the Court’s Order of February 14, 2018 (Filing No. 278), Defendants may
refile their Motion to Dismiss All Counts Asserted by Plaintiffs.
Josh F. Brown
LAW OFFICES OF JOSH F. BROWN, LLC
Matthew M. Cree
LAW OFFICE OF MATTHEW M. CREE, LLC
Danford Royce Due
DUE DOYLE FANNING & ALDERFER LLP
E. Brenda Kpotufe
MATTINGLY BURKE COHEN & BIEDERMAN LLP
LAW OFFICE OF JOSH F BROWN
Jonathan D. Mattingly
MATTINGLY BURKE COHEN & BIEDERMAN LLP
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