Graves v. Standard Insurance Company
Filing
119
MEMORANDUM OPINION signed by Senior Judge Charles R. Simpson, III on 8/19/2016, re: Plaintiff's 81 MOTION for Partial Judgment on the Pleadings, Plaintiff's 70 Second MOTION to Remand, Plaintiff's 110 Objection, Plaintiff's 111 MOTION to Stay, Plaintiff's 114 Objection, and Plaintiff's 115 MOTION to Stay. cc: counsel (RLK)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
LINDA GRAVES
PLAINTIFF/COUNTER DEFENDANT
v.
Civil action no. 3:14-cv-00558-CRS
STANDARD INS. CO.
DEFENDANT/ COUNTER CLAIMANT
Memorandum Opinion
I.
Introduction
Linda Graves sued Standard Insurance Company (“Standard”) for damages related to
Standard’s handling of her long-term disability benefits. Standard counterclaimed, alleging that
it overpaid Graves for the long-term disability benefits she did receive.
The Court will address the motions before the Court in the following sequence:
1. Plaintiff’s motion for partial judgment on the pleadings (DN 81)
2. Plaintiff’s second motion to remand (DN 70)
3. Plaintiff’s objection to magistrate judge’s opinion and order denying plaintiff’s
requested time to respond to summary judgment (DN 110) (“Plaintiff’s first
objection”)
4. Plaintiff’s motion to stay magistrate judge’s order denying plaintiff’s requested time
to respond to summary judgment (DN 111) (“Plaintiff’s first motion to stay”)
5. Plaintiff’s objections to magistrate judge’s order imposing sanctions for her counsel’s
conduct during Dr. Semble’s deposition and constraining the continuation of Dr.
Semble’s deposition to three hours (DN 114) (“Plaintiff’s second objections”)
6. Plaintiff’s motion to stay magistrate judge’s order that plaintiff has thirty days to
complete Dr. Semble’s deposition (DN 115) (“Plaintiff’s second motion to stay”)
The Court will grant partial judgment on the pleadings to Graves on the unjust
enrichment claim. The Court will dismiss Standard’s unjust enrichment claim, with prejudice.
The Court will deny the Plaintiff’s second motion to remand.
1
The Court will overrule the Plaintiff’s first objection and second objections. The Court
will deny as moot the Plaintiff’s first motion to stay and grant the Plaintiff’s first motion to stay.
II.
Plaintiff’s motion for partial judgment on the pleadings
Graves moves for partial judgment on the pleadings. Mot. Part. J. Pldgs. (DN 81).
Graves seeks dismissal of Count II of Standard’s counterclaim for unjust enrichment. Id.
A. Legal standard
“The Court reviews a 12(c) motion under the same standard as a Rule 12(b)(6) motion.”
Underwriters Safety & Claims, Inc. v. Travelers Prop. Cas. Co. of America, 2016 WL 297307
*1, *2 (W.D. Ky. Jan. 22, 2016). The claimant must plead “a short and plain statement of the
claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A pleading “does
not need detailed factual allegations,” but a “formulaic recitation of the elements of a cause of
action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Ultimately, the
pleading must allege “only enough facts to state a claim to relief that is plausible on its face.” Id.
at 570.
The Court assumes the veracity of well-pleaded factual allegations. Ashcroft v. Iqbal,
556 U.S. 662, 679 (2009). The Court determines whether the well-pleaded factual allegations
“plausibly give rise to an entitlement to relief.” Id. The Court is not bound to “accept as true a
legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555. A “naked
assertion” without “further factual enhancement” does not suffice. Iqbal, 556 U.S. at 678
(quoting Twombly, 550 U.S. at 557).
B. Count II of Standard’s counterclaim
Count I of Standard’s counterclaim is a breach of contract claim. Countercl. ¶¶ 39 – 42
(DN 61-2). Count I alleges that Graves breached the Group Policy and Repayment Agreement
2
by failing to inform Standard that she had received long term disability benefits from the
Kentucky Retirement Systems and the Social Security Administration and by failing to repay the
overpaid long-term disability benefits. Id. ¶¶ 41 – 42.
Count II of Standard’s counterclaim is an alternative claim for unjust enrichment. Id.
¶¶ 43 – 48. Count II alleges that Standard overpaid Graves’ long-term disability benefits and
that she has unjustly retained them. Id. ¶¶ 44, 48.
Kentucky law precludes recovery for unjust enrichment when an explicit contract is the
subject of the dispute. Codell Constr. Co. v. Kentucky, 566 S.W.2d 161, 162 (Ky. Ct. App.
1977). “The doctrine of unjust enrichment has no application in a situation where there is an
explicit contract which has been performed.” Id. “Where an express contract governs, unjust
enrichment is not appropriate.” Dixie Fuel Co., LLC v. Straight Creek, LLC, 2011 WL 845828
*1, *5 (E.D. Ky. 2011).
Graves argues that the unjust enrichment claim cannot stand when an express contract,
the Group Policy, governs Standard’s counterclaim. Pl.’s Mot. Part. J. Pldgs. 1 – 3.
Standard responds that it properly pleaded the unjust enrichment claim as an alternative
to the breach of contract claim. Def.’s Resp. Opp. Mot. J. Pldgs. 4 – 5 (DN 86). Standard argues
that the unjust enrichment claim is proper when Graves disputed in the answer that the Group
Policy provides a contractual basis for its right of recovery and recoupment. Id. at 4.
Graves did not dispute the existence of the Group Policy. See, e.g., Ans. to Countercl. ¶9
(DN 69) (admitting that the Group Policy contains the phrase, “You must repay us for the
resulting overpayment of your claim.”); see also, Group Policy, Page ID# 1313 (DN 61-2).
Also, Graves did not dispute the existence of the Repayment Agreement. See, e.g., Ans. to
Countercl. ¶ 14 (admitting that the Repayment Agreement contains the phrase, “I understand that
3
my receiving or being eligible to receive Deductible Income may result in an overpayment of
LTD benefits.”); see also, Repayment Agrmt. Page ID# 1326 (DN 61-2).
Rather, Graves disputed the legal conclusions asserted in the counterclaim for whether
the Group Policy and Repayment Agreement obligate Graves to repay allegedly overpaid
benefits. For example, the counterclaim alleges, “Pursuant to the Group Policy and Repayment
Agreement, Graves is obligated to repay to Standard and Standard is entitled to recover and
recoup the overpayment plus interest resulting from Graves’ receipt of benefits from the
[Kentucky Retirement Systems and Social Security Administration].” Countercl. ¶ 38. Graves
answered, “This paragraph is a legal conclusion and does not require a response.” Ans. to
Countercl. ¶ 38.
Standard relies on Knight for the proposition that, “Where, as here, a dispute exists as to
whether the contract governs the issues, pleading alternative claims for breach of contract and
unjust enrichment is permissible.” Def.’s Resp. Opp. Mot. J. Pldgs. 5 (citing Knight v. Stewart
Title Guar. Co., 2014 WL 4986676 at *10 (E.D. Ky. 2014)). This Court has rejected similar
arguments that an unjust enrichment claim can proceed concurrently with a breach of contract
claim. Handmaker v. CertusBank, N.A., 2015 WL 60439390 *3 (W.D. Ky. 2015) (“Those cases
are distinguishable because the existence of a contract was still in dispute.”); Business Payment
Sys., LLC v. National Processing Co., 2012 WL 6020400 *17 (“Because it is clear that BPS
performed any services for NPC pursuant to the marketing agreement—an explicit contract—the
unjust enrichment claim will be dismissed.”); see also, Shane v. Bunzi Distribution USA, Inc.,
200 F.App’x 397, 404 (6th Cir. 2006) (affirming district court’s dismissal of unjust enrichment
claim when an express contract existed).
4
Though the parties disagree about whether Standard should recover allegedly overpaid
benefits from Graves, the parties agree that the Group Policy governs whether Standard can
recover allegedly overpaid benefits from Graves. Pl.’s Mot. Part. J. Pldgs. 2 (“Fundamentally,
the relationship between Ms. Graves and Standard and the rights and obligations of the parties is
defined and governed by a written contract, the Group Policy, which dictates the terms and
conditions under which benefits are payable.”); Countercl. ¶ 12 (“The Group Policy establishes
Standard’s right of recovery and recoupment for an Overpayment Of Claim when disability
benefits have been overpaid.”). Therefore, Standard’s unjust enrichment claim cannot stand
because an explicit contract, the Group Policy, governs whether Standard can recover allegedly
overpaid benefits from Graves. For this reason, the unjust enrichment claim fails to “state a
claim to relief that is plausible on its face.” Twombly, 550 U.S. at 555.
The Court will grant Graves’s partial motion for judgment on the pleadings. The Court
will dismiss the unjust enrichment claim, with prejudice.
III.
Plaintiff’s second motion to remand
Graves originally filed this lawsuit in Jefferson Circuit Court. Am. Compl. 1 (DN 1-3).
Standard timely removed on August 5, 2014. See Mem. Op. & Order 1 (DN 18). On November
7, 2014, the Court denied the plaintiff’s first motion to remand. Id. In denying the motion to
remand, the Court discussed Graves’s argument that Standard had not met the amount in
controversy. Id. at 5 – 6. In a sworn interrogatory answer, Graves sought damages of “at least
$883,000.” Id. at 6. The Court found that Standard met its burden of establishing diversity
jurisdiction by a preponderance of the evidence. Id. at 3 – 7.
Notwithstanding the Court’s prior ruling, Graves again moves for remand. Pl.’s 2nd Mot.
Remand (DN 70). Graves argues that Standard’s counterclaim, filed after the Court denied
5
Grave’s first motion to remand, destroys federal jurisdiction. Id. at 1. Standard’s counterclaim
asserts that it overpaid Graves at least $41,764.08. Countercl. ¶¶ 42, 44. Thus, under Graves’s
argument, subtracting Standard’s alleged contractual damages ($41,764.08) from Graves’s
potential recovery for the breach of contract claim ($5,047.05) means that Graves’s claim has a
negative value ($5,047.05 – $41,764.08 = –$36,717.03), and the amount in controversy is no
longer met. Id.
The Court previously rejected Graves’s argument that her sworn interrogatory answer
that she valued her claim at $883,000 was insufficient to establish the amount in controversy by
a preponderance of the evidence. Mem. Op. & Order 5. The Court already held that Standard
met its burden of demonstrating by a preponderance of the evidence that federal jurisdiction
existed at the time of removal. Id. at 6 – 7.
Michael Grabhorn’s second motion to remand did not even acknowledge that the Court
had already addressed whether the amount in controversy had been met. In the reply in support
of the second motion to remand, Andrew Grabhorn continued to maintain that “Standard never
met its burden of proving by a preponderance of the evidence that this Court had subject matter
jurisdiction.” Pl.’s Reply Supp. Mot. Remand 2 n.2 (DN 76). In a recently filed reply, Andrew
Grabhorn asserted, “Again, the amount in controversy cannot be satisfied by a grossly
overestimated demand.” Pl.’s Reply Supp. Mot. Stay 2 (DN 117).
Beyond the second motion to remand, Andrew Grabhorn filed a notice of supplemental
authority. The supplemental authority is an opinion by U.S. District Judge Virginia M.
Hernandez Covington of the U.S. District Court of the Middle District of Florida. Pl.’s Not.
Supp. Auth. 1 (DN 91) (quoting Zabic v. Verizon Wireless Servs., LLC, 2015 LEXIS 170096
(M.D. Fl. Dec. 19, 2015)). That court remanded a case for a second time because “That Zabic
6
offered to settle her case for more than $75,000 does not establish by a preponderance of the
evidence that the amount in controversy requirement is met.” Zabic, 2015 LEXIS 170096 at
*14.
These arguments fly in the face of the Court’s previous opinion. The supplemental
authority and briefing by both Michael and Andrew Grabhorn make clear that Graves seeks the
Court’s reconsideration of its prior ruling: that Graves’ sworn interrogatory answer that she
sought damages of “at least $883,000” cannot establish the amount in controversy. Michael
Grabhorn filed the second motion to remand ten months after the Court denied remand the first
time. Andrew Grabhorn filed the supplemental notice of authority thirteen months after the
Court denied remand the first time. The Court rejects this transparent and grossly untimely
attempt to reopen a settled issue.
It is well-established that defendants must demonstrate at the moment of removal that the
Court has subject-matter jurisdiction. Curry v. U.S. Bulk Transp., Inc., 462 F.3d 536, 539 (6th
Cir. 2006); Knox Hills, LLC v. Ambac Assur. Corp., 2015 WL 1298622 *1, *2 (W.D. Ky. Mar.
23, 2015); Johnson v. Hartford Fire Ins. Co., 2008 WL 3850482 *1, *4 (W.D. Ky. 2008); see
also, Mem. Op. & Order 6 (“The Eastern District noted that defendants must be prepared ‘at the
moment of removal to demonstrate by a preponderance of the evidence that federal jurisdiction
exists, but that the defendant in that case was not so prepared.”) (emphasis in original).
The Court already held that Standard met this burden of demonstrating by a
preponderance of the evidence that federal jurisdiction exists at the time of removal. The Court
will not revisit this prior holding. The Court will deny the second motion to remand.
7
In the last two paragraphs of its response, Standard requested its attorney fees under 28
U.S.C. § 19271 for having to litigate the second motion to remand. Def.’s Resp. Opp. 2nd Mot.
Remand 6 – 7 (DN 73). In reply, Graves argued that the request was improper because Standard
should have filed a separate motion. Pl.’s Reply Supp. 2nd Mot. Remand 7. Additionally,
Graves requested “an opportunity to respond further.” Id.
At this time, absent the filing of a separate motion, the Court will not consider Standard’s
request for attorney fees for responding to the second motion to remand.
Plaintiff’s first objection and Plaintiff’s first motion to stay
IV.
On March 14, 2016, Standard moved for summary judgment. Mot. Summ. J. (DN 101).
On April 6, 2016, Graves moved for an extension of time to respond to summary judgment. Pl.’s
Mot. Ext. Time (DN 104). Graves asked for an extension of twenty-one days beginning after the
Court rules on the pending motions, including the second motion to remand. See Proposed Order
(DN 104-1). Standard opposed extending Graves’s deadline and opposed Graves’s related
motion to stay. Def.’s Resp. Opp. Pl.’s Mot. Ext. Time 1 (DN 106); Def.’s Resp. Opp. Mot. Stay
1 (DN 116).
On May 18, 2016, the magistrate judge denied Graves’s request for an “indefinite
extension” of time to respond to summary judgment. Order 2 (DN 108). The magistrate judge
1
The statute says,
Any attorney or other person admitted to conduct cases in any court of the United
States or any Territory thereof who so multiplies the proceedings in any case
unreasonable and vexaciously may be required by the court to satisfy personally
the excess costs, expenses, and attorneys’ fees reasonably incurred because of
such conduct.
28 U.S.C. § 1927.
8
denied the motion because Rule 56(d)2 requires a litigant seeking extra time to respond to
summary judgment to file an affidavit or declaration showing that it cannot present facts
essential to justify its opposition, and Graves had not presented such evidence. See id. The
magistrate judge explicitly said, “Graves shall be given 21 days from the date of entry of the
present order in which to respond to Standard’s pending motion for summary judgment.” Id.
Twenty-one days from the entry of that order was June 8, 2016.
On June 1, 2016, Graves objected to the magistrate judge’s order denying Graves’s
request. Pl.’s 1st Obj. (DN 110). First, Graves argues that the magistrate’s finding of good
cause to amend the scheduling order was also sufficient to support an extension of time for
responding to summary judgment. Id. at 3. Second, Graves also takes issue with the fact that the
magistrate judge did not discuss the motion for partial judgment on the pleadings. Id.3 Third,
Graves argues that she has not asked for an indefinite extension, but seeks only twenty-one days
after Court rules on the pending motions. Id. at 4.
On June 14, 2016, Graves moved to stay a ruling on the magistrate judge’s order. Pl.’s
1st Mot. Stay (DN 111). This first motion to stay said that due to an “inadvertent oversight and
mistake,” Graves did not file the motion to stay at the same time as the motion for extension of
time. Id. at 1. Graves’s first motion to stay asked the Court to stay the magistrate judge’s
2
Rule 56(d) says: “If a nonmovant shows by affidavit or declaration that, for specified
reasons, it cannot present facts essential to justify its opposition, the court may:
(1)
defer considering the motion or deny it;
(2)
allow time to obtain affidavits or declaration or to take discovery; or
(3)
issue any other appropriate order.”
3
The magistrate judge did note that there were an “extraordinary number of pending
motions” before this Court, and explicitly mentioned document number 81, the partial motion for
judgment on the pleadings, as one of those motions. Order 1.
9
twenty-one day deadline until the Court resolved the pending motions, including the second
motion to remand. Id.
In reviewing an objection to a magistrate judge’s order on a nondispositive matter, the
district judge must “modify or set aside any part of the order that is clearly erroneous or is
contrary to law.” Fed. R. Civ. P. 72(a).
Graves has not pointed to any portion of the magistrate judge’s order that was “clearly
erroneous” or “contrary to law.” Indeed, Graves did not address the central reasoning behind
why the magistrate judge denied Graves’s requested extension: Graves failed to comply with the
affidavit or declaration requirement of Rule 56(d). Although Graves argues that she did not
request an indefinite extension of time, the Court finds no error in the magistrate judge’s decision
to grant a twenty-one day extension.
The Court will overrule Graves’s objection to the magistrate judge’s order denying her
requested time to respond to summary judgment.
This leaves an important issue on the table: Graves’s deadline for responding to summary
judgment. Graves did not meet the June 8, 2016 deadline imposed by the magistrate judge. In
filing the motion to stay after the deadline passed, Graves acknowledged that objecting to the
magistrate judge’s order did not necessarily stay the effect of the order. Pl.’s 1st Mot. Stay 1.
A deadline is a deadline. The Court could deem Graves’s continued failure to meet the
magistrate judge’s deadline to respond to summary judgment as an abandonment of Graves’s
claims and defenses. See, e.g., Phillips v. Ternes, 2014 WL 4293003 *1, *2 (W.D. Ky. 2014) (a
plaintiff abandons a claim when the plaintiff fails to respond to summary judgment). Graves’s
counsel has managed to avoid filing a response to summary judgment—a response that was due
the first week of April—for over four months. Graves’s counsel relied on the fact that the
10
second motion to remand was pending to support requests for more time. See Pl.’s Mot. Ext.
Time 1; Pl.’s 1st Obj. 3; Pl.’s 1st Mot. Stay 3; Pl.’s Reply Supp. Mot. Stay 1 (DN 117). The
Court already discussed why the second motion to remand lacked merit. See discussion supra
Part III. This sequence offers further support for the Court’s conclusion that Michael Grabhorn
filed, and Andrew Grabhorn continued to litigate, the second motion to remand purely to game
the Court’s scheduling order.
On the other hand, the Court prefers to rule on dispositive motions on the merits, not
procedural technicalities resulting from what Graves’s counsel says was “inadvertent oversight
and mistake.” Pl.’s 1st Mot. Stay 1. In fairness to Standard, who opposed extending the
deadline and a stay, the Court will order Graves to respond to summary judgment within fourteen
days. The Court will deny the first motion to stay as moot.
V.
Plaintiff’s second objection and second motion to stay
The Court has already sanctioned Graves’s counsel once in this case. Mem. Op. & Order
(DN 72) (adopting R. & R. (DN 54)). The first sanction resulted from Graves’s counsel’s use of
“thinly veiled threats designed to silence the adverse opinion of an opposing party’s witness.”
Mem. Op. & Order 5. The opposing party’s witness is Dr. Richard Semble, who is at the center
of the new sanctions recommendation from the magistrate judge.
A. The magistrate judge’s recommendation
The magistrate judge detailed the “substantial and contentious history” between Dr.
Semble and Graves’s attorney, Michael Grabhorn. Order Rec. Sanct. 2 (DN 112). Michael
Grabhorn did not object to the magistrate judge’s discussion of this “substantial and contentious
history.” The Court incorporates the magistrate judge’s factual findings regarding the history
between Michael Grabhorn and Dr. Semble. Id. at 2 – 6.
11
In short, Michael Grabhorn sent Dr. Semble a notice of deposition for White Plains, New
York, on January 14, 2016. Standard’s attorney, Jacqueline Herring from Chicago, appeared in
person. Without warning to Standard, Michael Grabhorn appeared by videoconference from
Kentucky. After fifteen minutes of Michael Grabhorn’s “overtly disrespectful” conduct
questioning Dr. Semble, Dr. Semble announced that the deposition was over. Order Rec. Sanct.
17.
Graves moved to sanction Standard’s counsel and moved to strike Dr. Semble for
terminating the deposition. Pl.’s Mot. Sanct. (DN 93). Standard moved to terminate the
deposition and in the alternative for a protective order. Def.’s Mot. Prot. Order 9 (DN 95).
The magistrate judge issued a detailed eighteen page opinion on these motions. The
magistrate judge concluded, “First, as a matter of fact, the Court concludes that attorney
[Michael] Grabhorn deliberately intended to provoke Dr. Semble from the outset of the
deposition.” Order Rec. Sanct. 10. The magistrate judge found that Graves’s counsel violated
Rule 30(b)(3)(A)4 for failing to state in the notice of the deposition the method of recording the
deposition, and Graves’s counsel violated Rule 30(b)(4)5 for failing to obtain a court order or
stipulation before taking Dr. Semble’s deposition by remote videoconference. Id. at 11. Michael
Grabhorn did not object to the magistrate judge’s findings that he violated Rule 30 twice.
4
“The party who notices the deposition must state in the notice the method for recording
the testimony. Unless the court orders otherwise, testimony may be recorded by audio,
audiovisual, or stenographic means. The noticing party bears the recording costs. Any party
may arrange to transcribe a deposition.” Fed. R. Civ. P. 30(b)(3)(A).
5
“The parties may stipulate—or the court may on motion order—that a deposition be
taken by telephone or other remote means. For the purpose of this rule and Rules 28(a), 37(a)(2),
and 37(b)(1), the deposition takes place where the deponent answers the questions.” Fed. R. Civ.
P. 30(b)(4).
12
The magistrate judge concluded that Graves’s counsel should pay for the cost of
recording the attempted January 14, 2016 deposition, and Graves’s counsel should pay for the
cost of audiovisual recording for a future deposition of Dr. Semble. Id. at 12. Graves did not
object to this conclusion. The Court will adopt the conclusion of the magistrate judge that
Graves’s counsel shall pay for the January 14, 2016 audiovisual recording and any audiovisual
recording of a future deposition of Dr. Semble.
The magistrate judge denied Standard’s request to terminate Dr. Semble’s deposition. Id.
at 13. The magistrate judge found that Michael Grabhorn’s “obvious intent” in treating Dr.
Semble the way he did was “to provoke a situation that could be the basis for the doctor’s
exclusion as an expert witness.” Id. at 17. The magistrate judge wrote
that any such future deposition shall be scheduled within the next 30 days at a
time and place mutually agreeable to the parties and shall be conducted in
accordance with not only the requirement of the Federal Rules of Civil Procedure
and the Kentucky Rules of Professional Conduct set forth in Supreme Court Rule
3.130, but also in accordance with the aspirational guidelines of the Kentucky Bar
Association’s Code of Professional Courtesy.
Id. at 13.
The magistrate judge denied Graves’s motion to sanction Standard’s attorney Jacqueline
Herring for terminating Dr. Semble’s deposition reasoning that, “It was the deliberate
misconduct of attorney Grabhorn himself that was the genesis of the entire situation given the
manner in which he conducted the deposition.” Id. at 13 – 14. Graves objects to the magistrate
judge’s imposition of sanctions, but Graves did not object to the magistrate judge’s denial of
plaintiff’s motion for sanctions against Standard. See Pl.’s 2nd Obj. (DN 114).
B. Graves’s second objections
1. Notice and opportunity
13
First, Graves objects to the imposition of sanctions on the ground that the magistrate
judge failed to give notice of the potential for statutory sanctions. See, e.g., Pl.’s 2nd Obj. 2 (“In
order to enter 28 U.S.C. § 1927 sanctions sua sponte, the Magistrate Judge was required to give
Ms. Graves advance notice of the legal rule being considered, the reasons for the sanctions, and
the form the sanctions would take.”).
However, in ruling on Graves’s objection, the issue is not whether the magistrate judge
provided notice of the potential for statutory sanctions. Rather, the issues are (1) whether
Michael Grabhorn was on notice of the potential for statutory sanctions after he received the
magistrate judge’s order which explicitly recommended sanctions, and (2) whether he had a fair
opportunity to respond to the potential imposition of statutory sanctions when he filed objections
to the magistrate judge’s recommendation.
The cases on which Graves relies to support the lack of notice argument are unavailing.
Graves cited two district court opinions from this circuit and one Sixth Circuit opinion. Pl.’s 2nd
Obj. 2 – 3 (citing Gordon v. Dadante, 2009 WL 1850309 *25 n.27 (N.D. Oh. 2009); Conz v.
Lady, 2000 U.S. Dist. LEXIS 22137 *22; Davis v. Bowron, 30 F.App’x 373 (6th Cir. 2002)).
Although Gordon discussed notice and opportunity in a footnote, the district court declined to
impose sanctions in that order. 2009 WL 1850309 *25.
Conz, and its subsequent history, actually supports the opposite conclusion: that Michael
Grabhorn was on notice of the potential for statutory sanctions upon receipt of the magistrate
judge’s recommendation to impose statutory sanctions, and he had a reasonable opportunity to be
heard in filing objections to the recommendation.
In Conz, the magistrate judge recommended statutory sanctions and discussed notice and
opportunity to be heard in a footnote,
14
Although [defense counsel] sought sanctions against [plaintiff's counsel], they did
not invoke section 1927. Consequently, imposition of such sanctions would be in
the nature of a sua sponte act. This report and recommendation gives [plaintiff's
counsel] notice of the possibility of such sanctions, and he has the ten-day period
provided by law in which to object.
Conz v. Lady, 2000 U.S. Dist. LEXIS 22137 22 n.1 (W.D. Mich. Jan. 25, 2000) (citing Fed. R.
Civ. P. 72(b)).6 The district court adopted that report and recommendation and imposed
sanctions. Conz v. Lady, 2000 U.S. Dist. LEXIS 22138 (W.D. Mich. Feb. 29, 2000) (rejecting
counsel’s lack of notice and opportunity argument as “disingenuous”).
The sanctioned attorney appealed. The court of appeals found no abuse of discretion for
the district court’s order imposing sanctions:
In any event, after the Magistrate Judge recommended that the District Court
impose sanctions under 28 U.S.C. § 1927, Mr. Davis could no longer argue that
he was without notice of the District Court’s intention to consider doing so.
Moreover, the fact that he filed objections to the report and recommendation
belies his contention that he was not afforded an opportunity to be heard, which is
simply the opportunity to make arguments and present evidence, not the right,
literally to speak to the court.
Davis, 30 F.App’x at 375.
The Court finds that Michael Grabhorn was on notice of the potential imposition of
statutory sanctions once the magistrate judge recommended statutory sanctions for his conduct
during the Dr. Semble’s attempted deposition. The Court finds that Michael Grabhorn had a
reasonable opportunity to be heard regarding sanctions for his conduct during the Dr. Semble’s
attempted deposition because he filed an objection.
2. Sanctionable conduct
Second, Graves objects to the imposition of sanctions by arguing that the conduct “did
not rise to the level of sanctionable conduct.” Pl.’s 2nd Obj. 4 – 8. Graves argues that the
6
The previous version of Rule 72(b) imposed a ten-day deadline for filing objections to a
magistrate judge’s order on nondispositive matters. Now, the rule imposes a fourteen-day
deadline. Fed. R. Civ. P. 72(a) (2009 Amendment).
15
magistrate judge’s three factual findings regarding Michael Grabhorn’s conduct during Dr.
Semble’s deposition were insufficient to warrant sanctions. Specifically, Graves’s counsel
points to the findings that Michael Grabhorn had “no legitimate reason” to not use Dr. Semble’s
professional title when addressing him; that Michael Grabhorn disparaged Dr. Semble’s
intelligence by “asking him if he needed a dictionary to define the term ‘prepare;’” and “this
series of events was not inadvertent” because Michael Grabhorn laughed when Dr. Semble
“stormed out of the deposition room in a rage.” Order Rec. Sanct. 17.
The Court disagrees with Graves’s argument that this conduct did not warrant sanctions.
The magistrate judge described Dr. Semble’s deposition as follows:
Review of the video recording of the deposition persuades the Court that Graves’
counsel, from the very outset of the deposition proceedings, intended to
deliberately provoke Dr. Semble by conducting his communications with the
doctor in both an unprofessional and overtly abusive fashion that the Court finds
was specifically intended to cause the doctor maximum and unnecessary
psychological distress. No legitimate reason existed to deliberately refuse to
address Dr. Semble as such, particularly after the doctor reasonably requested that
counsel do so. Likewise, disparaging the doctor’s intelligence by asking him if he
needed a dictionary to define the term ‘prepare’ also was a tactic intended to
provoke the doctor, who not surprisingly became increasingly upset with the
overtly disrespectful manner in which he was being treated by counsel.
The fact that this series of events was not inadvertent, or merely negligent, is
confirmed first by the obvious amusement of Graves’ counsel who clearly can be
[heard] on the video recording laughing at the doctor’s discomfort after the doctor
spontaneously stormed out of the deposition room in a rage. Second, this very
sequence of events was submitted by Graves as the primary basis on which to
entirely exclude the future testimony of the doctor, which the Court finds was the
obvious intent of counsel for Graves from the outset of the deposition—to
provoke a situation that could be the basis for the doctor’s exclusion as an expert
witness.
While the Court encourages vigorous advocacy at all stages of the litigation
before it, what occurred during the attempted deposition of Dr. Semble clearly
crossed over the line and became vexatious.
Id. at 16 – 17 (emphasis added). Like the magistrate judge, the Court has reviewed the video,
and the Court agrees that Michael Grabhorn’s conduct in the deposition crossed a line.
16
Dr. Semble was noticeably agitated from the beginning of the tape. That agitation was
understandable given his and Jacqueline Herring’s surprise that Michael Grabhorn did not appear
in person, given the technical difficulties that plagued each side’s ability to hear questions and
answers, see, e.g., Tr. 10 – 11, and given the “substantial and contentious history” between Dr.
Semble and Michael Grabhorn. Again, Michael Grabhorn did not object to the magistrate’s
finding that he and Dr. Semble have a “substantial and contentious history.”
This “substantial and contentious history” came to a head on January 14, 2016. This
“substantial and contentious history” culminated with Michael Grabhorn calling Dr. Semble
“Mr. Semble;” telling Dr. Semble that he would “be happy to get a copy of Webster’s
Dictionary;” and engaging in an aggressive back and forth over the difference between Dr.
Semble’s notes and “the file” and whether “the file” was Dr. Semble’s or Standard’s:
Q: Now, did you prepare for your deposition today?
A: I looked at my notes.
Q: So that’s a yes. You’re stating that you did in fact prepare for your
deposition today; is that correct?
A: I don’t know what the word prepare means. I looked at my notes.
Q: Well, I’ll be happy to get a copy of Webster’s Dictionary, but what part
of prepare do you not understand?
Attorney Herring: He’s answered the question.
Q: No. I am asking him why he doesn’t understand the word prepared so I
could sit there and elaborate on my question. So, once again, with respect to the
word prepare, what part of that do you not understand? What did you do today to
get ready to testify?
A: Read my notes.
Q: And where are these notes today?
A: The notes is the file. There’s no – I don’t have any notes –
Q: Okay.
A: – other than the file. That’s what I meant, the file.
Q: Okay. So the notes that are contained in the file, where are those notes
today?
A: I misspoke. It’s not notes. It’s the file itself.
Q: Okay. Whether it’s notes or the file itself, where is that file today?
Attorney Herring: It’s right here.
A: I don’t hold on to the file. I don’t hold on to the file. My attorney’s
advised me that she has presented the file here.
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Q: Okay. So I am confused. I asked you what you did to prepare for your
deposition today, your testimony. You initially told me it was notes, you
indicated you misspoke and that it was the file that you reviewed to prepare today,
your file. Now am I to understand it’s not your file, it’s your counsel’s file?
Attorney Herring: Objection. You’re mischaracterizing his testimony. He
– he clarified that what he meant by notes was the file. The file is right here.
Q: If he doesn’t understand it, he can ask me. Please, no more speaking
objections, once again. Please help me out here. Who’s file is this? Is this your
file?
(Dr. Semble whispers to Attorney Herring)
Q: No. You may not speak with your attorney. What question did he just
ask you? Please repeat it on the record. What question did he – what’s stated to
his attorney, please get it on the record.
Attorney Herring: He said you’re making this very difficult for him.
Q: Because I asked him where he had his records?
Attorney Herring: You know, he’s here –
A: I’m here for substance of the matters. I’m not here to go over
Webster’s Dictionary. I looked at the file.
Q: Okay. That’s what I’m just clarifying. So this is your file, correct?
A: No, it’s not my file. It’s Standard’s file.
Q: Whose file is it?
A: Standard’s file.
Q: Okay. It’s Standard’s file. So how did you come to review Standard’s
file?
Attorney Herring: Can we – we need to take a break for a minute.
A: I’m not going to do this. I’m not.
Semble Dep. Tr. 13 – 16 (DN 93-1). The transcript does not tell the whole story, however. Far
from Graves’s counsel’s assertion that “The deposition was proceeding appropriately – minus the
couple of minor hiccups that were quickly resolved,” the video demonstrates that Michael
Grabhorn began the deposition with an aggressive, disrespectful tone, escalated his sarcasm in an
obvious effort to provoke Dr. Semble, and laughed when he successfully provoked Dr. Semble
into saying, “I’m not going to do this. I’m not.”
Dr. Semble’s agitation did not justify Michael Grabhorn’s “aggressive tactics that far
exceed zealous advocacy.” Red Carpet Studios Div. of Source Advantage, Ltd. v. Sater, 465 F.3d
642, 646 (6th Cir. 2006). Under an objective standard, Michael Grabhorn’s conduct in the
deposition fell far “short of the obligations owed by a member of the bar to the court” and caused
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additional expense to Standard. Rentz v. Dynasty Apparel Indust., Inc., 556 F.3d 389, 396 (6th
Cir. 2009). This conduct—which the magistrate judge found was intentional, and the Court
agrees was intentional—warrants sanctions.
The Court will overrule Graves’s second objection. The Court will adopt the magistrate
judge’s conclusion that Michael Grabhorn’s deposition conduct was sanctionable behavior. The
Court will sanction Michael Grabhorn under 28 U.S.C. § 1927 for this conduct. The Court will
grant Standard its reasonable attorney fees and costs incurred in responding to the plaintiff’s
motion for sanctions.
3. Limiting Dr. Semble’s future deposition
Third, Graves objects to the magistrate judge’s order that Dr. Semble’s resumed
deposition “shall be limited to a time period of three hours with a 10 minute break on the hour.”
Id. at 15. Graves argues that “this portion of the order ignores the Federal Rules mandate that
depositions are to proceed for up to seven (7) hours.” Pl.’s 2nd Obj. 9.
Rule 30(d) says: “Unless otherwise stipulated or ordered by the court, a deposition is
limited to one day of 7 hours.” Fed. R. Civ. P. 30(d) (emphasis added).
Graves has not pointed to any part of this portion of the magistrate judge’s order that was
“clearly erroneous” or “contrary to law.” The Court will overrule Graves’s objection to the
magistrate judge’s order limiting the deposition of Dr. Semble to three hours. The Court will
adopt the magistrate judge’s order regarding Dr. Semble’s deposition.
The Court will grant Graves’s second motion to stay. Graves’s counsel will have thirty
days from the entry of this order to depose Dr. Semble, if that still occurs. To be clear, the
Court reiterates the magistrate judge’s instruction that Dr. Semble’s deposition
shall be scheduled … at a time and place mutually agreeable to the parties and
shall be conducted in accordance not only with the requirement of the Federal
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Rules of Civil Procedure and the Kentucky Rules of Professional Conduct set
forth in Supreme Court Rule 3.130, but also in accordance with the aspirational
guidelines of the Kentucky Bar Association’s Code of Professional Courtesy.
Order Rec. Sanct. 13.
VI.
Conclusion
The Court will grant Graves’s motion for partial judgment on the pleadings. The Court
will dismiss Standard’s unjust enrichment claim, with prejudice.
The Court will deny the second motion to remand.
The Court will overrule the Plaintiff’s first objection to the magistrate judge’s order
denying the plaintiff’s requested extension of time. The Court will order Graves to respond to
summary judgment within fourteen days. The Court will deny the first motion to stay as moot.
The Court will overrule the Plaintiff’s second objection to the magistrate judge’s order
recommending the imposition of sanctions. The Court will order Graves’s counsel to pay for the
cost of audiovisual recording of the January 14, 2016 deposition, and the Court will order
Graves’s counsel to pay for the cost of audiovisual recording any future deposition of Dr.
Semble. The Court will impose sanctions under 28 U.S.C. § 1927 against Michael Grabhorn for
his conduct during Dr. Semble’s deposition. The Court will award Standard its reasonable
attorney fees and costs incurred in responding to the plaintiff’s motion for sanctions.
The Court will grant Plaintiff’s second motion to stay. The Court will order any such
future deposition of Dr. Semble shall occur within thirty days of the entry of the order, and in
accordance with this opinion.
August 19, 2016
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