First Mariner Bank v. The Resolution Law Group, P.C.

Filing 259

REPORT AND RECOMMENDATION re 238 MOTION for Sanctions filed by First Mariner Bank Signed by: Judge Magistrate Judge Susan K. Gauvey. Signed by Magistrate Judge Susan K. Gauvey on 4/22/14. (jnls, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
FIRST MARINER BANK,

*

Plaintiff

*

v.

*

THE RESOLUTION LAW GROUP,
P.C., et al.,

CIVIL NO.

MJG-12-1133

*
*

Defendants.
*
*

*

*

*

*

*

*

*

*

*

*

*

Report and Recommendation
Pending

before

the

Court

is

(“Plaintiff”) motion for sanctions.
has

considered

Resolution
response

the

Law

in

motion,

Group’s

opposition

thereto (ECF No 251).

R.

(“RLG”)
(ECF

No.

First

Mariner

(ECF No. 238).

Geoffrey

Broderick’s

(collectively
246),

and

Bank’s

The Court
and

the

“Defendants”)

Plaintiff’s

reply

The Court held a hearing on the present

motion, as well as Plaintiffs pending motion for entry of civil
contempt order (ECF No. 202), on April 9, 2014.
For

the

reasons

discussed

herein,

it

is

the

(ECF No. 253).
undersigned’s

recommendation that Plaintiff’s motion for sanctions (ECF No.
238) be GRANTED and the sanction of default be entered against
Defendants.1

1

On March 7, 2013, in accordance with 28 U.S.C. § 636 and Local Rules 301 and
302, Judge Garbis referred this case to the undersigned for all discovery and

1

I.

Background
Judge Garbis, in his memorandum order denying Defendants’

motion

to

dismiss

(ECF

No.

60),

summarized

Plaintiff’s claims against Defendants.

the

nature

of

Plaintiff has pled three

claims: false advertising in violation of the Lanham Act (15
U.S.C. § 1125(a)), unfair competition, and defamation.
Plaintiff’s

claims

against

Defendants

are

based

on

All of
Defendant

Resolution Law Group’s (“RLG”) mail advertisements dated April
6, 2012 and May 3, 2012 (and possibly other dates) to certain of
Plaintiff’s Maryland customers.
was

investigating

First

Mariner

practices,

and

was

First

Mariner,

engaging

indicated

These mailers stated that RLG

in

that

suggested
illegal

some

said

that

the

government

would

and

banks

negotiations with government agencies.
seek

(at

minimum)

improper

were

in

that

banking

settlement

The advertisements also
monetary

damages

for

related scheduling matters.
(ECF No. 72).
Referral of a case to a
Magistrate Judge to resolve discovery matters pursuant to 28 U.S.C. §
636(b)(1)(A) and Local Rule 301.5.a authorizes the Magistrate Judge to order
any appropriate relief short of an order dispositive of one or more pending
claims or defenses. Any objection to such an order must be served and filed
within fourteen (14) days after service of the order.
Local Rule 301.5.a.
(D. Md. 2011).
If, however, a Magistrate Judge determines that a default
judgment is the appropriate remedy for discovery misconduct, the Magistrate
Judge must make findings and recommendations for action pursuant to 28 U.S.C.
§ 636(b)(1)(B) and Local Rule 301.5.b.
When a Magistrate Judge issues a
Report and Recommendation, any objections by the parties must be served and
filed within fourteen (14) days after a copy of the proposed findings and
recommendations is served on the party wishing to object, pursuant to Fed. R.
Civ. P. 72(b).
Local Rule 301.5.b. (D. Md. 2011).
Judge Garbis referred
this matter to the undersigned for all discovery and related scheduling
matters, thus, to the extent that this memorandum orders non-dispositive
relief, it shall be pursuant to 28 U.S.C. § 636(b)(1)(A) and to the extent
that it recommends dispositive relief, it shall be pursuant to 28 U.S.C. §
636(b)(1)(B). In either case, the parties have fourteen (14) days in which
to serve and file objections to any aspect of this Report and Recommendation.
Local Rule 301.5 (D. Md. 2011).

2

individuals and reductions in home loans, principal balances,
and interest rates.

The mailers urged the recipients to contact

RLG promptly.
Plaintiff maintains that RLG is operating a mass joinder
mortgage reduction scam, similar to scams condemned in other
jurisdictions.

Plaintiffs allege that RLG’s mailers are untrue

and seek to scare recipients into engaging RLG (and paying a
retainer)

for

non-existent

mortgage

reduction

services

and

representation in a scam-lawsuit which RLG has no bona fide
basis

for

filing

——

all

to

the

considerable

detriment

of

Plaintiff’s business and goodwill.
A. History of Discovery Misconduct
It is against the backdrop of these claims and factual
allegations

that

Plaintiff

first

sought

discovery

from

Defendants, serving Plaintiff’s first discovery on Defendants on
December 11, 2012.
Plaintiff’s

Dissatisfied with Defendants’ response to

first

set

of

interrogatories

and

requests

for

production of documents, on March 13, 2013, Plaintiff filed a
motion

to

compel

discovery.

(ECF

No.

73-1).

Following

a

hearing, by letter memorandum and order, dated April 19, 2013,
the Court agreed with Plaintiff, finding Defendants’ answers to
interrogatories
boilerplate.

to

be

(ECF

No.

totally
87).

unresponsive
As

such,

the

and

largely

Court

ordered

Defendants to fully answer, by May 1, 2013, interrogatories Nos.
3

4

(all

employees),

7

(cost

of

advertisement

mailings),

10

(persons involved in creation, maintenance, funding, and domain
registration),

11

(list

and

information

regarding

persons

answering calls from recipients of mailed advertisements) and 14
(recordings and transcriptions of calls).
Court

warned

that

interrogatories]
sanction.”

“[f]ailure

will

subject

to

(Id. at 2).
[completely

defendants

to

The
answer

additional

(Id. at 1).

The Court similarly found many of Defendants’ responses to
Plaintiff’s

requests

for

production

of

documents

“totally

uninformative [and] boilerplate,” noting that Defendants failed
to actually produce any documents with their response.
2).

(Id. at

As such, the Court ordered Defendants to produce, by May 1,

2013, all documents sought in requests Nos. 1, 4, 5 and 6 (all
advertisements including blanks and drafts), 7, 8 (contracts,
including those with Marketing Smart and Register.com), 10, and
11

(scripts,

amount).

training

materials,

including

subject

of

fee

The Court likewise warned that “[f]ailure to produce

all documents will subject Defendant[s] to additional sanction.”
(Id.)
The Court’s April 19, Order also commanded, in order to
assure

that

Plaintiff

would

receive

all

disseminated

advertisements or drafts of the same, Mr. Ian Berger of RLG to
submit an affidavit “attaching all advertisements, explaining
4

and attesting to the fact that these represent the universe of
advertisements and drafts.”

(Id.).

Additionally, the Court

further ordered production of “a complete list of recipients of
defendants’ advertisements” (under cover of Berger’s affidavit),
a list of RLG employees to date and a “viable address” for
Defendants’
affidavit)

marketing
and

firm

finally

(also

that

Mr.

under
Berger

cover
should

of

Berger’s

state

in

his

affidavit that he “has attempted to obtain a current, valid
address

[for

the

marketing

firm]

no

substantive

and

list

those

attempts.”

(Id.).
Finding

justification

for

Defendants’

discovery failures, the Court’s April 19, Order awarded expenses
to Plaintiff.

(Id.).

By letter motion dated May 2, 2013 (ECF No. 91), Plaintiff
complained that Defendants had failed to comply with the Court’s
April 19, 2012 Order. As such, the Court held a hearing on May
21,

and

agreed

that

comply,

as

ordered

Defendants

Defendants

delineated
to

in

the

had

file,

significantly

telephone

by

June

hearing,

5,

2013,

failed
and

to

thus,

supplemental

answers to interrogatory Nos. 4 (all employees), 7 (cost of
advertisement mailings), 8 (selection of recipients of mailed
advertisements), 10 (persons involved in creation, maintenance,
funding
regarding

and

domain

persons

registration),

answering

calls
5

11
from

(list

and

recipients

information
of

mailed

advertisements), 14 (recordings and transcriptions of calls);
supplemental

responses

advertisements

to

including

request

blanks

Nos.

and

5

and

drafts),

7

6

(all

(contracts

including with Marketing Smart and Register.com), 10 (scripts,
training

materials,

supplementation
(failure

to

including

to

subject

the
all

attach

Berger

Advertisements,

of

fee

affidavit,

amount);

paragraph

including

Nos.

blanks

and
3
and

drafts, with attestation that those attached are the universe of
advertisements),

7

(failure

to

give

specifics

of

effort

to

identify valid address for Marketing Smart), and 8 (failure to
obtain lists of recipients from Marketing Smart).
105).

Further,

the

Court

ordered

that

these

(ECF No.
supplemental

answers and responses must be signed by both Mr. Kirk and Mr.
Calhoun as counsel and both Mr. Berger and Mr. Broderick as
representatives of RLG and that the supplemental affidavit be
signed by both Mr. Berger and Mr. Broderick.
By letter dated June 6, 2013, Plaintiff again advised the
Court that Defendants had failed to comply with the May 22,
Order.

In response, by letter order dated June 13, 2013 (ECF

No. 121), the Court asked Plaintiff’s counsel to specifically
identify

remaining

discovery

deficiencies

and

instructed

Defendants’ counsel “to carefully review my past letter orders
and

the

compliance

plaintiff’s
[and

counsel’s

warned

that]

complaint

[c]ontinued
6

regarding
failure

to

lack

of

respond

completely

may

result

in

additional

sanctions,

up

to

and

including entry of default judgment on any claims negatively
affected by the failure of discovery.” (Id.) (emphasis added).
The

Court

held

a

hearing

on

June

24

and

once

again

found

continued failure to satisfactorily respond, including failure
to answer certain interrogatories, notably interrogatory Nos. 4
(all

employees),

8

(selection

of

recipients

of

mailed

advertisements), 10 (internet website consultant), 11 (list and
information regarding persons answering calls of recipients of
mailed advertisements), and 14 (recordings and transcripts of
calls);

failure

to

answer

certain

requests

for

documents,

notably documents Nos. 5 and 6 (all drafts of advertisements), 7
(contracts
vendors),

with
and

Marketing

10

Smart,

(scripts,

Register.com

training

materials,

and

other

etc.);

and

continued failure to provide the ordered affidavit statements on
the universe of advertisements and drafts, an adequate address
for Marketing Smart to allow service of a subpoena, lists of
recipients

associated

with

specific

advertisements,

and

an

attestation that lists are the universe of persons who received
advertisements

(A

list

of

recipients

was

first

produced

literally during the discovery hearing on June 24, though the
list was not associated with any particular mailing).
Following the June 24, hearing, the Court issued a letter
memorandum

and

order,

dated

July
7

3,

2013,

allowing

that

Defendants
which

could

may

“still

lessen

violations

to

the

date.

cure

the

[above

sanction”
(ECF

No.

noted]

imposed
140).

for

deficiencies,
its

discovery

However,

the

Court

“determined to award additional attorney’s fees (as set forth by
Plaintiff’s counsel in ECF No. 123 and to which Defendant has
not

responded)”

sanctions.

and

(Id.).

ordered

served

as

to

any

further

As directed, Plaintiff filed its motion for

sanctions on July 15, 2013.
Defendants

briefing

on

(ECF No. 142).

Plaintiff

their

On July 31, 2013,

supplemental

discovery

responses, addressing the deficiencies outlined in the Court’s
July

3,

Order,

and

responded

with

a

memorandum

opposing

Plaintiff’s motion for additional sanctions. (ECF No. 143).
By memorandum opinion, dated October 24, 2013, the Court
determined
discovery

that

misconduct

memorandum
obstreperous
failures

sanctions

in

to

opinion

date.

misconduct

context

of

warranted

(ECF

discussed,

discovery
the

were

the

No.

“the

history

of

The

Court’s

in

detail,

Defendants’

and

evaluated

Defendants’

Circuit’s

four-factor

Fourth

Defendants’

2

Defendants’

160).

standard for assessing appropriate sanctions.2
factor-one,

for

First, as to

discovery

misconduct

Courts in the Fourth Circuit must consider four factors in determining what
sanctions to impose for a party’s discovery misconduct: (1) whether the noncomplying party acted in bad faith; (2) the amount of prejudice that
noncompliance caused the adversary; (3) the need for deterrence of the
particular sort of non-compliance; and (4) whether less drastic sanctions
would have been effective. Southern States Rack & Fixture, Inc. v. SherwinWilliams Co., 318 F.3d 592, 597 (4th Cir. 2003)(quoting Anderson v. Found.
For Advancement, Educ. & Employment of Am. Indians, 155 F.3d 500, 504 (4th
Cir. 1998)).

8

overwhelmingly demonstrates the Defendants’ bad faith.”
20).

(Id. at

Second, as to factor-three and factor-four, the Court

determined the “need for deterrence is great” for the type of
meritless

non-compliance

obviously,

the

exhibited

by

monetary

sanction

previous

expenses was ineffective.”
question

involved

Defendants

(Id. at 21).

factor-two,

“the

of

and

an

“quite

award

of

The more difficult

nature

and

extent

of

prejudice that First Mariner suffered and suffers by Defendants’
discovery

misconduct,

and

prejudice.”

(Id.

22).

prejudice

evasiveness,

——

at

the

appropriate

The
delay,

Court
and

relief

found

both

obfuscation

for

that

procedural

hindering

a

party’s ability to develop its case, a “death by a thousand
cuts” approach to legitimate discovery requests —— as well as
substantive

prejudice

prosecute

claim

a

or

——

hindering

present

a

evidence

party’s
at

trial.

ability

to

Following

Defendants’ July 31 supplemental discovery disclosure, the Court
acknowledged that the prejudice to date was largely procedural
given that Defendants eventually produced much of the requested
discovery (or swore that it did not exist —— sometimes with
questionable credibility), with the important exceptions of the
denial of information regarding Marketing Smart and the lack of
identification of past employees.

(Id. at 27-28).

Accordingly,

by amended order, dated December 4, 2013, the Court ordered the
following sanctions against Defendants:
9

[T]hat
defendants
are
liable
to
plaintiff
for
attorney’s fees in the amount of $23,221.00 and shall
pay plaintiff this amount by December 13, 2013;
[T]hat the following jury instruction be given at the
trial of this case:
Through the course of discovery, the court
found that defendants delayed in providing
complete information about RLG’s operations,
personnel and procedures, the development of
mailed advertisements, and the selection of
targeted
recipients
of
the
mailed
advertisements.
While defendants eventually
provided much of the requested information,
defendants’ delay impeded plaintiff’s effort to
develop evidence to support its allegation that
defendant RLG is not offering legitimate legal
services.
Accordingly, you may consider this conduct by
defendants along with all of the other evidence
presented, during trial, in deciding the issues
presented for your determination in this case.
[T]hat defendants may not introduce any further
evidence on their costs of the mailed advertisements,
beyond the per piece cost provided.
[T]hat defendants shall provide plaintiff with the
contact information for all persons identified in
answers to interrogatories nos. 4 and 11 and for Gary
L. Kit Wright, Bill Goodman and Brian Maller by
December 11, 2013.
(ECF No. 191).
On December 16, 2013, Plaintiff filed its motion for entry
of civil contempt order (ECF No. 202), following Defendants’
failure to pay the $23,221.00 attorney’s fees sanction by the
10

December 13, 2013 deadline.
held

a

hearing

Broderick

in

on

civil

37(b)(2)(A)(vii).

On February 21, 2014, the Court

Plaintiff’s
contempt,

motion

pursuant

(ECF No. 252).

and
to

found
Fed.

R.

Defendant
Civ.

P.

An additional hearing as to

the appropriate remedy for Defendant Broderick’s contempt was
held on April 9, 2014.

(ECF No. 253).

According to a status

report filed by Defendants on April 15, 2014, Defendants have
finally paid the $23,221.00 sanction imposed pursuant to the
Court’s December 4, Order.

(ECF No. 255).

The Court has now

received verification of that payment.
B. Present Discovery Dispute
On March 7, 2014, Plaintiff filed its second motion for
sanctions

following

Defendants.
three

further

alleged

(ECF No. 238).

bases

for

discovery

misconduct

by

Specifically, Plaintiff asserts

additional

sanctions:

(1)

spoliation

of

evidence, (2) failure to respond to interrogatories, and (3)
failure

to

adequately

prepare

RLG’s

Defendant Broderick, for deposition.
Regarding

Plaintiff’s

Rule

30(b)(6)

designee,

(Id. at 3).

interrogatories,

on

November

22,

2013, Plaintiff served identical sets of 3 interrogatories on
Defendants, seeking information about Defendants’ revenue and
net profits associated with advertisements pertaining to First
Mariner

and

the

costs

incurred

by

Defendants

in

pursuing

lawsuits against First Mariner in New York, New Jersey, and any
11

other location.

(ECF No. 238-5).

At the time Plaintiff filed

its motion for sanctions, March 7, 2014, Defendants had not
responded.

Defendants responded to Plaintiff’s interrogatories

contemporaneously
Plaintiff’s
receiving

with

motion

for

Plaintiff’s

filing

Defendants

sanctions

opposition

(four-months

interrogatories).

(ECF

after

No.

to
first

246,

23).

Plaintiff’s reply brief objects to the adequacy of Defendants’
interrogatory

responses,

asserting

that

Defendants’

responses

raise boilerplate objections and respond evasively.

(ECF No.

251, 6-7).
As to Mr. Broderick’s preparation for his deposition, on
December

18,

2013,

Defendant

capacity

designee.

(ECF No. 238-2; ECF No. 238-3).
notice

as

identified

RLG’s

was

individual

30(b)(6)

and

Broderick

thirty

Rule

six

deposed

30(b)(6)

in

his

corporate

Plaintiff’s Rule
(36)

topics

for

examination for Mr. Broderick’s deposition (ECF No. 238-2, 6-9).
Topics included, for example, “the identity of any person [RLG]
represent[s] in the lawsuits [against First Mariner] that [RLG]
claim[s] has an action against [First Mariner],” “payments from
the plaintiffs of the lawsuits [against First Mariner] and the
terms of engagement,” “[RLG] offices, including staff, support,
and record keeping,” and “the maintenance of [RLG] books and
records,

including

without

limitation

retention and destruction policies.”
12

document

and

(ECF No. 238-2).

e-mail
A review

of

the

transcript

excerpts

of

Mr.

Broderick’s

deposition

illustrates the sort of responses given by Mr. Broderick on
these topics, for example:
Q.
What if any document retention policy does the
Resolution Law Group have?
A.
I’m not
documents.

aware

of

the

Q.

policy

for

Do you know if one exists?

A.

particular

No, I’m not sure.

(ECF No. 238-4, 7).
Q.
You don’t know if The Resolution Law Group has
1099 forms for independent contractors it has worked
with?
A.

It might, but I don’t know for sure, sorry.

Q.

Where would you look for that information?

A.
I -- I don’t know -- I don’t know if we 1099’d or
whom we’ve 1099’d
Q.
I’m not asking who right now. I want to know if
you’ve ever provided a 1099 form to an independent
contractor working with the resolution Law Group.
A.

I don’t know for sure.

Q.
Where would the
Resolution Law Group?

1099

form

be

kept

by

The

A.
I don’t know. That’s a good question. I’m not
sure.
(Id. at 9-10).
13

Q.
What services have
Resolution Law Group?

accountants

provided

the

A.
I don’t know exactly what’s the services, what
was performed and what was not performed.
Q.
Where were the accountants located who performed
services for the Resolution Law Group?
A.
I’m not sure. I know over the past couple of
years we’ve used a couple of different accountants.
I’m not sure exactly where they’re located, if they
had their own office or if they working out of one of
the offices. I’d have to look into that. I’m sorry. I
don’t know the answer.
(Id. at 10-11).
Q.
With respect to number 18, “Costs incurred by you
in pursuing the lawsuits,” what inquiry did you
undertake to determine that you are the person that
can respond to questions on that topic -- on behalf of
The Resolution Law Group.
A.
I didn’t do any inquiry. I just figured you had
if you had any concerns about it, you’d discuss it
with me, like the other questions.
(Id. at 36).
Q.
Number 32 “the maintenance of your books and
records, including without limitation documents and
email
retention
and
destruction
policies.”
What
inquiry did you undertake that you were the best
person to respond to questions on that topic?
A.

I did not inquire into that, I’m sorry.

14

Q.
You didn’t make any inquiry. You don’t know if
there’s
any
document
retention
policy,
you’ve
testified to that earlier; correct?
A.

Right, that’s correct.

Q.
And you don’t know where, if at all,
Resolution Law Group maintains business records?
A.

The

That’s correct.

(Id. at 40).

Mr. Broderick similarly could not identify where,

or if, RLG maintains client files for a client represented by
RLG in a federal “mass tort action” in the Eastern District of
New York (Case No. 1:12-cv-04686):
Q.

You don’t have a file for Mr. Abraham?

A.
I don’t know the extent to which Mr. Abraham has
a file.
(Id. at 39).

Moreover, Mr. Broderick refused to answer any

questions

pertaining

to

Amendment

approximately

RLG

finances,

forty

(40)

invoking

times

in

the

Fifth

response

to

questioning on topics such as whether RLG has paid any filing
fees in connection with mass-tort lawsuits against First Mariner
or other banks, how much money RLG has received from plaintiffs
it purports to represent in mass-tort actions, and how much RLG
paid Marketing Smart in connection with marketing RLG services.
(Id. at 31-40).
Finally, as to alleged spoliation of evidence, during Mr.
Broderick’s December 18, deposition, Mr. Broderick admitted that
15

“a few months” prior to his December deposition (in the midst of
discovery)

or

“around

the

summertime,”

he

“disposed

laptop he used in connection with RLG business.
16-18).

of”

the

(ECF No. 238-4,

Mr. Broderick acknowledged that the discarded laptop

was, in fact, the only computer he used for RLG business for
several

years

prior

to

its

alleged

“crash.”

(Id.

at

18).

However, Mr. Broderick refused (or was unable) to identify what
efforts he actually undertook to recover the computer’s hard
drive or even where he actually “disposed of” or “recycled” the
device.

(Id. at 18-22).

For example, Mr. Broderick described

his alleged recovery efforts as follows:
Q.

Who did you ask about that?

A.
I don’t know. I’m remembering when
don’t know if I went to Office Depot,
Staples. Wherever I bought the new
probably consulted with the team, the
the store about it.
I would imagine
would have done.

I bought –- I
Office Max or
computer, I
tech team, at
that’s what I

Q.
Did you consult with – you would imagine. Do you
know if you did that?
A.
No, I don’t remember exactly what I -– I remember
doing –- trying to do everything that I could to
recover the old laptop.
Q.
And you described a conversation that you maybe
had with someone at an Office Depot, but you don’t
know if that happened?
A.
No, I –- I talked with –- I went and shopped at a
few different stores for a new laptop, and I think
16

each time I was – at the facility I asked them about
hard drive recovery, what, if anything, can be done
from a hard drive that’s fried. And I don’t remember
what the outcome was, but I was not able to recover
anything from the –- from the laptop unfortunately.
Q.
Anything
that?

else

you

do

in

an

effort

to

A.
Nothing else that I know about, that
remember. I believe I did everything I could.
(Id. at 20-21).

recover

I

can

Additionally, when questioned about where he

actually discarded the “old” laptop, Mr. Broderick stated as
follows:
Q.

And where did you discard that laptop?

A.
I don’t remember if it was Office Max, Office
Depot or Staples, because I’ve used all three, and -it depends where I bought the new one. I makes sense
for me to have done it, but I’ve recycled stuff before
so I – I don’t know which exact facility it was.
Q.
It may have been the facility where you purchased
the new laptop?
A.

Yeah. It could have been there, absolutely.

(Id. at 22).

Mr. Broderick did not discuss with anyone the fact

that his laptop crashed or that he disposed of it.
25).

Mr.

Broderick

also

admitted

during

his

(Id. at 24-

deposition

to

disposing of the “smartphone” he used in connection with RLG
business only “a few weeks” prior to the deposition:
Q.

What did you end up doing with that phone?

17

A.
Recycled. When you get a new phone, you trade in
your old one.
Q.

So you traded in that phone for a new one?

A.

Right

Q.

And that would have been done a couple weeks ago?

A.
I believe it’s
something like that.
Q.

been

a

few

weeks

or

a

month,

And where was that done?

Q.
Sprint. Just sent my phone in. I don’t know where
it went.
(Id. at 29-30).

II.

Discussion
In

light

Plaintiff’s

of

Defendants’

present

motion

history

for

sanctions

remedy of entry of judgment by default.
R.

Civ.

impose

P.

37

grants

sanctions

for

the
a

district

party’s

of

discovery
seeks

the

abuse,
extreme

(ECF No. 238, 2).

court

failure

wide
to

Fed.

discretion

comply

with

discovery orders, including entry of default judgment.

to
its

See,

e.g., Mutual Fed. Sav. & Loan Ass’n v. Richards & Assoc., Inc.,
872 F.2d 88, 92 (4th Cir. 1989); e.g., Anderson v. Found. for
Advancement, Educ. & Emp’t of Am. Indians, 155 F.2d 500, 504
(4th Cir. 1998).
power”

to

Similarly, district courts have the “inherent

sanction

a

party,

including

18

entry

of

default

or

dismissal of an action, when a party abuses the judicial process
at

a

level

that

is

utterly

inconsistent

with

the

orderly

administration of justice or undermines the integrity of the
process.

Projects Mgmt. Co. v. Dyncorp Int’l, LLC, 734 F.3d

366, 373-74 (4th Cir. 2013) (citing U.S. v. Shaffer Equipment
Co.,

11

involves

F.3d

“range

450,

judgment
of

465
by

discretion

(4th

Cir.

default,
is

1993)).

however,

more

narrow”

When

the

a

district

because

the

sanction
court’s
district

court’s desire to enforce its discovery orders or uphold the
integrity of the judicial process is “confronted head-on by the
party’s rights to a trial by jury and a fair day in court.”
Mutual Fed. Sav., 872 F.2d at 92 (quoting Wilson v. Volkswagen
of America, Inc., 561 F.2d 494, 503-04 (4th Cir. 1977)); see
also Projects Mgmt., 734 F.3d. at 373-74.
turns

first

present

to

consider

whether

the

motion

warrants

sanction,

As such, the Court

conduct

and

if

alleged
so,

in

the

whether

the

sanction of judgment by default is appropriate in this case.
A. Motion for Sanctions
The Plaintiff identified three (additional) incidents of
discovery misconduct in its motion.

Each will be addressed in

turn.
i.

Spoliation of Evidence

“Spoliation

refers

to

the

destruction

or

material

alteration of evidence or to the failure to preserve property
19

for

another’s

use

as

evidence

foreseeable litigation.”

in

pending

or

reasonably

Silvestri v. General Motors Corp., 271

F.3d 583, 590 (4th Cir. 2001)(citations omitted).

A party’s

“failure to preserve electronic or other records, once the duty
to do so has been triggered, raises the issue of spoliation of
evidence and its consequences.”

Goodman v. Praxair Services,

Inc., 632 F. Supp.3d 494, 505 (D. Md. 2009); see also Thompson
v. U.S. Dept. of Health and Urban Development, 219 F.R.D. 93,
100 (D. Md. 2003).

The district court’s authority to impose

sanctions against a party for spoliation of evidence derives
from two primary sources.

See United Medical Supply Co., Inc.

v. U.S., 77 Fed.Cl. 257, 264-65 (2007).
the

“inherent

litigation
abuses

to

the

power”
the

to

control

extent

judicial

necessary

process.

the
to

First, courts possess
judicial
redress

Silvestri,

271

process
conduct
F.3d

and
which

at

590

(quoting Chambers v. NASCO, Inc., 501 U.S. 32, 45-46 (1991)).
Second, if spoliation violates a court order or disrupts the
court’s discovery plan, Fed. R. Civ. P. 37 grants courts wide
discretion to impose appropriate sanctions.

See Mutual Fed.

Sav., 872 F.2d at 92; Anderson, 155 F.2d at 504; Victor Stanley,
Inc. v. Creative Pipe, Inc., 269 F.R.D. 497, 517 (D. Md. 2010).
Here,

Plaintiff

violated

by

destruction

has

not

Defendants’
of

identified
alleged

Defendant

any

spoliation

Broderick’s
20

order

of

this

Court

of

evidence

(the

laptop

computer

and

smartphone).

Thus, the Court’s authority to sanction Defendants

must derive from the Court’s inherent power to regulate the
judicial process.
In this Circuit, to prove sanctionable spoliation, a party
must show that:
(1) the party having control over the evidence had an
obligation to preserve it when it was destroyed or
altered; (2) the destruction or loss was accompanied
by a “culpable state of mind;” and (3) the evidence
that was destroyed or altered was “relevant” to the
claims

or

discovery

defenses
of

the

of

the

spoliated

party

that

evidence,

to

sought
the

the

extent

that a reasonable factfinder could conclude that the
lost

evidence

would

have

supported

the

claims

or

defenses of the party that sought it.

Victor Stanley, 269 F.R.D. at 520-21 (quoting Goodman, 632 F.
Supp.2d at 509); accord Silvestri, 271 F.3d at 591, 593-94.
(1)
The

Duty to Preserve Evidence

Court’s

first

consideration

is

whether

the

alleged

spoliator had a duty to preserve the lost or destroyed evidence
and

whether

he

or

she

breached

that

duty.

Once

a

party

reasonably anticipates litigation, it is obligated to suspend
its ordinary document retention and/or destruction policies and
implement

a

“litigation

relevant documents.

hold”

to

ensure

the

preservation

of

Silvestri 271 F.3d at 591 (“The duty to

preserve material evidence arises not only during litigation but
21

also

extends

to

that

period

before

litigation

when

a

party

reasonably should know that the evidence may be relevant to
anticipated litigation.”) (citation omitted); Goodman, 632 F.
Supp.2d at 511.

“Generally, it is the filing of a lawsuit that

triggers the duty to preserve evidence.”

Turner v. U.S., 736

F.3d 274, 282 (4th Cir. 2013) (citing Victor Stanley, 269 F.R.D.
at

522)).

This

duty

arises

regardless

of

whether

the

organization is the initiator or the target of the litigation
and includes an obligation to identify, locate, and maintain
evidence

which

may

be

relevant

to

anticipated

litigation.

Victor Stanley, 269 F.R.D. at 521-22 (citation omitted).
Here,

Defendant

Broderick

refused

(or

was

unable)

to

provide the actual date on which he “disposed of” his laptop
computer, stating instead, that he disposed of the computer “a
few months ago” or “around the summertime I think.”
238-4,

16-17).

Defendant

Accordingly,

Broderick

destroyed

it

is

the

unclear

laptop

(ECF No.

precisely

computer,

but

when
his

testimony indicates that the alleged spoliation occurred well
into factual discovery and even after this Court’s April 19, May
22,

and

July

3,

Orders

compelling

production

responses to interrogatories, and awarding fees.

of

documents,

Mr. Broderick

is the owner and founder of Defendant RLG and is himself a named
defendant

in

this

case.

Clearly,

in

the

middle

of

factual

discovery, Mr. Broderick had a duty to implement a “litigation
22

hold” and preserve potentially relevant electronic evidence and
documents.

When Mr. Broderick “disposed of” or “recycled” his

laptop computer, he put any relevant evidence contained therein
forever

out

of

the

reach

of

Plaintiff

and

forestalled

any

meaningful attempts, by either party, to recover documents on
the computer’s hard drive. Accordingly, Mr. Broderick had a duty
to preserve the potentially relevant evidence contained on his
laptop

computer,

which

he

violated

when

he

disposed

of

the

device.
Mr. Broderick similarly disposed of his smartphone only “a
few weeks” prior to his December, 2013, deposition.

Again, the

timing of this alleged spoliation clearly fits within the period
when Defendant Broderick, for himself and for RLG, had a duty to
preserve

potentially

relevant

evidence,

including

potentially

relevant electronic evidence.
Defendants’ duty to preserve is beyond question as to both
the laptop and the smart-phone.
(2)

Culpability

The second consideration for resolving alleged spoliation
of evidence is to determine whether the alleged spoliator acted
culpably.

The Fourth Circuit recently clarified the culpable

state of mind required for a finding of spoliation:
Spoliation does not result merely from the negligent
loss or destruction of evidence. Vodusek v. Bayliner
Marine Corp., 71 F.3d 148, 156 (4th Cir. 1995).
23

Rather, the alleged destroyer must have known that the
evidence was relevant to some issue in the anticipated
case, and thereafter willfully engaged in conduct
resulting in the evidence’s loss or destruction. See
id. Although the conduct must be intentional, the
party seeking sanctions need not prove bad faith. Id.
Turner,

736

negligence

F.3d

–

is

at

282.

Thus

insufficient.3

negligence
However,

–

even

gross

intentionality

is

conduct

is

sufficient, even in the absence of bad faith.
Willful

conduct

is

equivalent

intentional, purposeful, or deliberate.
F.3d

306,

323

(4th

Cir.

2008);

to

that

Buckley v. Mukasey, 538

Vodusek,

71

F.3d

at

156.

Willfulness is established when a party “knew the evidence was
relevant to some issue at trial” and his or her intentional,
purposeful,
destruction.

or

deliberate

conduct

resulted

Vodusek, 71 F.3d at 156.

in

its

loss

or

Conversely, “bad faith”

requires “destruction for the purpose of depriving the adversary
of the evidence.”

Victor Stanley, 269 F.R.D. at 530 (quoting

Powell v. Town of Sharpsburg, 591 F. Supp.2d 814, 820 (E.D.N.C.
2008)).
Here, the Court finds Mr. Broderick’s conduct constitutes
bad faith.

Defendants have obfuscated and obstructed discovery

3

Compare Victor Stanley, 269 F.R.D. at 529 (finding that “[i]n the Fourth
Circuit, for a court to impose some form of sanctions for spoliation, any
fault – be it bad faith, willfulness, gross negligence or ordinary negligence
– is a sufficiently culpable mindset” and noting that “[u]nder existing case
law, the nuanced, fact-specific differences among these states of mind become
significant in determining what sanctions are appropriate”) (citation
omitted).

24

in

this

case

reprimanded
jury

at

every

with

opportunity

multiple

instructions,

and

and,

attorney’s

preclusion

lawyer,

and

it

is

baffling

to

fees

of

trial relating to particular issues.

to

date,

have

sanctions,

additional

been

adverse

evidence

at

Mr. Broderick is himself a
the

Court

that

a

lawyer

(particularly one, such as Mr. Broderick, who has filed federal
mass-tort

actions

in

multiple

jurisdictions

and

collected

approximately $2.6 million dollars in fees from clients tied to
those

lawsuits)

would

not

understand

the

concept

of

a

“litigation hold” and would not know that his only work computer
and

smartphone

were

instruments

relevant

to

the

present

litigation.
Moreover,

“’the

volume

spoliation is telling.”
In

the

very

middle

and

of

Defendants’

See Victor Stanley, 269 F.R.D. at 531.
of

factual

“recycled”

his

laptop

rendering

any

and

all

Mr.

Broderick’s

unrecoverable.

timing’

computer

and

discovery,

Mr.

smartphone,

information
utterly

on

Broderick

unequivocally

either

device

uninformative

and

inconsistent description of the steps he took to recover his
laptop’s

“crashed”

hard

drive

is

shocking

and

devoid

of

credibility, raising the question whether Mr. Broderick actually
took any legitimate steps to recover data:
Q.
No[w] what attempts did you make to recover
records or any -- any records that were on the laptop
you discarded?
25

A.
I made every attempt I could to try to recover
the hard drive ... Everything pretty much fried, so I
did what I could to try to recover it. I don’t
remember, but I thoroughly went through it to see if
there was any chance of me trying -- I didn’t want to
have to buy another laptop ...
Q.
Did you consult with any computer expert about
the laptop?
A.
I don’t remember if I did or not where I bought
the new one. I may have to -- I don’t remember exactly
what exactly I went through in trying to recover. I
made a very diligent effort in trying to do what I
could to save any information ...
Q.

And what efforts were those?

A.
Just trying to go through the hard drive just to
see if there was anything that was left of it.
...
Q.
And you -A.
I think when I brought -- when I bought the -the new one I -- when I went, took the old one to be
recycled, I believe we did everything that we could to
see if there was any way of being able to transfer
anything off of the old computer onto the new one just
so I wouldn’t lose files. Also to make it obviously a
lot more convenient in the transition process from the
old to the new. And there was -- I believe all efforts
to that was futile.
Q.

Who did you ask about that?

A.
I don’t know. I’m remembering when I bought -- I
don’t know if I went to Office Depot, Office Max or
Staples. Wherever I bought the new computer, I
probably consulted with the team, the tech team, at

26

the store about it. I would imagine that’s what I
would have done.
Q.
Did you consult with -- you would imagine. Do you
know if you did that?
A.
No, I don’t remember exactly what I -- I remember
doing -- trying to do everything that I could to
recover the old laptop.
Q.
And you described a conversation that you maybe
had with someone at Office Depot, but you don’t know
if that happened?
A.
No, I -- I talked with -- I went and shopped at a
few different stores for a new laptop, and I think
each time I was -- at the facility I asked them about
hard drive recovery, what, if anything, can be done
from a hard drive that’s fried. And I don’t remember
what the outcome was, but I was not able to recover
anything from the -- from the laptop unfortunately.
...
Q.
So you traded in that phone for a new one?
A.

Right

Q.

And that would have been done a couple weeks ago?

A.
I believe it’s
something like that.
Q.

been

a

few

weeks

or

a

month,

And where was that done?

Q.
Sprint. Just sent my phone in. I don’t know where
it went.
(ECF No. 238-4, 18-21, 29-30). This apparent amnesia relates to
events

which

occurred,

not

years

before,

testimony, three to six months before.

27

but

from

his

own

In fact, despite Mr.

Broderick’s refusal to accurately identify when he destroyed his
laptop computer, his testimony indicates that he destroyed the
computer

after

compelling

this

Court’s

discovery

from

July

3,

Defendants

Order
and

(ECF

No.

allowing

140)

Plaintiff

leave to seek sanctions for Defendants’ discovery misconduct to
date.

The

timing

of

Mr.

Broderick’s

destruction

of

the

smartphone is arguably even more telling, occurring only a “few
weeks” prior to Mr. Broderick’s December, 2013 deposition and
after

this

Court

awarded

the

aforementioned

sanctions

to

Plaintiff (ECF No. 160).
Defendants’ opposition to Plaintiff’s present motion for
sanctions

offers

no

Broderick’s actions.
522-23

(finding

clarification

or

justification

for

Mr.

Unlike Goodman, 632 F. Supp.2d at 503-04,

willful

spoliation

of

evidence

where

the

defendant intentionally destroyed a “key player’s” computer by
reimaging and repurposing the computer during the corporation’s
“ordinary course of business as technology became outdated”),
Mr.

Broderick’s

pursuant
program.

to

some

computer
RLG

and

smartphone

technology

updating

were

not

and/or

destroyed
repurposing

Rather, Mr. Broderick purposefully and intentionally

disposed of both devices with no rational justification.

As was

the case in Victor Stanley, 269 F.R.D. at 531, Mr. Broderick’s
conduct rises to the level of bad faith.

Mr. Broderick disposed

of his computer and smartphone despite his knowledge of the
28

present

lawsuit

provided

–

indeed

incoherent,

explanations

for

justification

his

for

the

pending

discovery

requests

-,

has

inconsistent

and

wholly

unbelievable

actions,

and

has

offered

no

all

against

same

–

the

rational

backdrop

of

Defendants’ obstreperous conduct throughout discovery in this
case

and

incessant

information.

attempts

to

avoid

producing

discoverable

See also Barette Outdoor Living, Inc. v. Michigan

Resin Representatives, No. 11-13335, 2013 WL 3983230, at * (E.D.
Mich.

Aug.

1,

2013)(awarding

spoliation

sanctions

where

the

defendant acted in bad faith by using a scrubbing software to
wipe files from his personal laptop and discarded his cell-phone
by turning it into Sprint).

The Court will not turn a blind eye

to this egregious conduct committed in the midst of discovery.
(3)

Relevance and Resulting Prejudice

Lastly, the Court must consider the relevance of the lost
evidence and the resulting prejudice. “Relevance” for purposes
of spoliation is a “two-pronged” finding of (1) relevance and
(2) prejudice.

Victor Stanley, 269 F.R.D. at 531-32.

In this

context, evidence is “relevant” if “a reasonable trier of fact
could conclude that the lost evidence would have supported the
claims or defenses of the party that sought it.”
Goodman,

632

F.

Supp.2d

at

509;

Thompson,

Id. at 531;

F.R.D.

at

101.

Spoliation results in prejudice if, as a result of the
spoliation, the non-spoliating party’s ability to present its
29

claim or defense is compromised or the spoliator’s conduct was
so

egregious

defense.

as

to

amount

to

a

forfeiture

of

its

claim

or

See Silvestri, 271 F.3d at 593 (finding, “at bottom,”

the harsh sanction of dismissal is warranted where a court is
able to conclude either “(1) that the spoliator’s conduct was so
egregious as to amount to a forfeiture of his claim, or (2) that
the effect of the spoliator’s conduct was so prejudicial that it
substantially denied the defendant the ability to defend the
claim); Victor Stanley, 269 F.R.D. at 532 (“Generally, court’s
find prejudice where a party’s ability to present its case or
defend is compromised.”)(citations omitted).
in

this

Circuit

recognize

that

“[w]hen

Moreover, courts

the

party

alleging

spoliation shows that the other party acted willfully in failing
to

preserve

presumed.”

evidence,

the

relevance

of

that

evidence

is

Victor Stanley, 269 F.R.D. at 532 (citing Sampson,

251 F.R.D. at 179; Thompson, 219 F.R.D. at 101).

Accordingly,

because the Court finds that Defendants acted not only willfully
but

with

bad

faith

by

spoliating

evidence

contained

on

Mr.

Broderick’s laptop computer and smartphone, the Court presumes
the relevance of the evidence contained therein.4
4

Thus, the

Defendants’ opposition to Plaintiff’s motion for sanctions raises the fact
that Mr. Broderick claimed during his deposition that he did not use his
discarded smartphone’s email function (ECF No. 246, 23; ECF No. 238-4, 30).
However, this argument reaffirms the very rationale for the presumption of
relevance following willful or bad faith spoliation of evidence, as the nonspoliating party is left with no recourse to test or challenge the veracity
of a claim that lost evidence was nonexistent or had no relevance. See
Sampson, 251 F.R.D. at 197 (“the reason relevance is presumed following a

30

Court

shall

move

to

the

second

step,

consideration

of

the

resulting prejudice and what sanctions shall apply.
Plaintiff asserts that it has been manifestly prejudiced by
Defendants’ spoliation of Mr. Broderick’s laptop computer and
smartphone,

because

Defendants

whereabouts

of

RLG

Broderick’s

laptop

unequivocally
business.

any

have

business

and

identified

records

smartphone
as

used

(ECF No. 238-1, 15).

puzzling

argument

Broderick

“the

that,
most

refused

and,

are
in

to

identify
to

the

date,

only

connection

the
Mr.

items

with

RLG

Defendants respond with the

because

Plaintiffs

important

question:

did

not

[w]hat

ask

Mr.

specific

documents were on the cell phone and laptop computer?” it is
impossible to determine relevance or prejudice.

(ECF No. 246,

23).

position,

The

Court

disagrees

with

Defendants’

as

explained supra, because of Mr. Broderick’s bad faith conduct,
relevance is presumed.
Here,

Defendants’

obstruction

of

the

regarding RLG business records is stark.
produced

any

RLG

business

records

to

discovery

process

Defendants have not
date

and

during

Mr.

Broderick’s deposition, wherein he was deposed in his individual
capacity

and

as

RLG’s

Rule

30(b)(6)

designee,

he

claimed

showing of intentional or willful conduct is because of the logical inference
that, when a party acts in bad faith, he demonstrates fear that the evidence
will expose relevant, unfavorable facts.”)(citing Vodusek, 71 F.3d at 156).

31

absolutely no knowledge of the whereabouts or existence of any
records maintained by RLG:
Q.
You mentioned “client files.” Are there any other
business records maintained at the Las Vegas -A.
I’m just guessing at the files. I’m not sure what
files there are. I’m just speculating that there might
be client files. I don’t know if they -- he keeps
files there or we keep files on a different location
or if they outsource the use, space for files, that -I haven’t had to conversation with him.
...
Q.
What
business
records,
if
any,
does
The
Resolution Law Group maintain at the Connecticut
office?
A.
I’m not aware of any records being kept there.
...
Q.
What if any document retention policy does The
Resolution Law Group have?
A.
I’m not
documents.
Q.

aware

of

the

particular

policy

for

Do you know if one exists?

A.
No, I’m not sure
...
Q.
You were describing your home office. Do you
maintain any business records of The Resolution Law
Group at the home office?
A.
No,
records

not

that

--

I

don’t

believe

I

have

any

Q.
Do you have any files relating to The Resolution
Law Group at your home office?
A.
...

No, I don’t believe I have any files there.

32

Q.
And you don’t know where, if at all,
Resolution Law Group maintains business records?
A.

The

That’s correct.

(ECF No. 238-4, 3, 4-5, 25-26, 40).

It is obvious that the

permanent loss of the only identified sources of information
into the operations of RLG prejudices Plaintiff’s ability to
present its case.

Here, much of Plaintiff’s case is premised on

the theory that RLG is not a legitimate law firm, and thus, had
neither the capacity nor the intention of bringing any bona fide
lawsuits on behalf of the recipients of its mailers.
pertaining

to

Plaintiff’s

these

false

issues

advertising

is

of

and

particular
unfair

Evidence

importance

competition

to

claims.

Accordingly, prejudice resulting from this loss of evidence is
severe, and it is left to the Court to determine what sanction
is appropriate.
While a district court has broad discretion in choosing an
appropriate sanction for spoliation, “the applicable sanction
should

be

remedial

molded

to

rationales

serve

the

underlying

prophylactic,
the

punitive,

spoliation

and

doctrine.”

Silvestri, 271 F.3d at 590 (quoting West v. Goodyear Tire &
Rubber Co., 167 F.3d 776, 779 (2nd Cir. 1999)).

“The harshest

sanctions may apply not only when both severe prejudice and bad
faith are present, but also when, for example, culpability is
minimally

present,

if

there

is
33

a

considerable

showing

of

prejudice, or, alternatively, the prejudice is minimal but the
culpability

is

great”

Victor

F.3d

593

Silvestri,

271

at

including

dismissal,

are

Stanley,

(finding
“usually

269

that

F.R.D.

severe

justified

at

533;

sanctions,
only

in

circumstances of bad faith or other ‘like action’ ... [b]ut even
when conduct is less culpable, dismissal may be necessary if the
prejudice

to

the

[non-spoliating

party]

is

extraordinary,

denying it the ability to adequately defend [or present] its
case”) (citing Cole v. Keller Indus., Inc., 132 F.3d 1044, 1047
(4th Cir. 1998)).5

With these principles in mind, the Court will

address Defendants’ other sanctionable conduct before turning to
what sanctions are appropriate at this stage of the case.
ii.

Duty to Designate and Prepare a Rule 30(b)(6) Witness

A corporation noticed pursuant to Fed. R. Civ. P. 30(b)(6)
is compelled to comply and may be ordered to designate witnesses
5

The Court also notes that the authority to impose sanctions for spoliation
derives from court’s “inherent power” to uphold the integrity of the judicial
process and fashion the appropriate sanction for conduct that disrupts the
same.
Silvestri, 271 F.3d at 590 (citing Shaffer Equip. Co., 11 F.3d at
450).
Thus, before entering the “most extreme sanctions,” i.e. dismissal
without considering the merits or entry of judgment by default, a court must
also weight the following factors: “(1) the degree of the wrongdoer’s
culpability; (2) the extent of the client’s blameworthiness if the wrongful
conduct is committed by its attorney, recognizing that we seldom dismiss
claims against blameless clients; (3) the prejudice to the judicial process
and administration of justice; (4) the prejudice to the victim; (5) the
availability of other sanctions to rectify the wrong by punishing culpable
persons, compensating harmed persons, and deterring similar conduct in the
future; and (6) the public interest.”
Projects Mgmt., 734 F.3d at 373-74
(quoting Shaffer Equipment, 11 F.3d at 462-63). Analysis of the defendants’
actions under these factors likewise compels imposition of a severe sanction.
Like obstruction of justice in a criminal case, destruction of evidence in a
civil case strikes at the heart of our system of the rule of law.
Whether
witness intimidation in a criminal case or destruction of evidence in a civil
case, the perpetrator takes the law into his own hands, hoping to disable the
system from reaching a decision on the merits.

34

if it fails to do so.

8A Charles A. Wright, Arthur R. Miller,

et al., Federal Practice & Procedure § 2103, at 453-54 (3d ed.
2010).
The goal of the Rule 30(b)(6) requirement is to enable
the responding organization to identify the person who
is best situated to answer questions about the matter,
or to make sure that the person selected to testify is
able to respond regarding the matter. In making the
selection, the responding entity must designate a
person or persons “who consent to testify on its
behalf,” and it may “set out the matters on which each
person designated will testify.” Once that designation
is accomplished the rule says that “[t]he persons
designated must testify about information known or
reasonably available to the organization.”
Id.

Thus, testimony elicited at the Rule 30(b)(6) deposition

“represents
individual

the

knowledge

deponents.

(M.D.N.C. 1996).

U.S.

of

the

v.

corporation,

Taylor,

166

not

F.R.D.

of

the

356,

361

The duty to prepare a Rule 30(b)(6) designee

has been succinctly described by Magistrate Judge Eliason of the
Middle District of North Carolina in Taylor:
If persons designated by the corporation do not
possess personal knowledge of the matters set out in
the deposition notice, the corporation is obligated to
prepare
the
designees
so
that
they
may
give
knowledgeable and binding answers for the corporation.
Dravo Corp v. Liberty Mutu. Ins. Co., 164 F.R.D. 70,
75, 75 (D. Neb. 1995)(citing Marker, 125 F.R.D. at
126).
Thus, the duty to present and prepare a Rule
30(b)(6) designee goes beyond matters personally known
to that designee or to matters on which that designee
was personally involved. Buycks-Robertson v. Citibank
Federal Sav. Bank, 162 F.R.D. 338, 343 (N.D.Ill.
35

1995); S.E.C. v. Morelli, 143 F.R.D. 42, 45 (S.D.N.Y.
1992)
...
Rule 30(b)(6) explicitly requires [the entity] to have
persons testify on its behalf as to all matters known
or
reasonably
available
to
it
and,
therefore,
implicitly requires such persons to review all matters
known or reasonably available to it in preparation for
the Rule 30(b)(6) deposition.
This interpretation is
necessary in order to make the deposition a meaningful
one and to prevent the “sandbagging” of an opponent by
conducting
a
half-hearted
inquiry
before
the
deposition but a thorough and vigorous one before the
trial.
Id. at 361-62; see also International Ass’n of Machinists and
Aerospace Workers v. Werner, 390 F. Supp.2d 479, 487 (D. Md.
2005)(quoting Taylor, 166 F.R.D. at 361); Paul Revere Life Ins.
V. Jafari, 206 F.R.D. 126, 127-28 (D. Md. 2002) (quoting Taylor,
166 F.R.D. at 361-62).
Reviewing the transcript of Mr. Broderick’s deposition, it
is

abundantly

clear

the

he

was

woefully

unprepared.

His

testimony indicates that few (or likely no) steps were taken
prepare for his deposition:
Q.
With respect to number 18, “Costs incurred by you
in pursuing the lawsuits,” what inquiry did you
undertake to determine that you are the person that
can respond to questions on that topic -- on behalf of
The Resolution Law Group.
A.
I didn’t do any inquiry. I just figured you had
if you had any concerns about it, you’d discuss it
with me, like the other questions.
...
36

Q.
Number 32 “the maintenance of your books and
records, including without limitation documents and
email
retention
and
destruction
policies.”
What
inquiry did you undertake that you were the best
person to respond to questions on that topic?
A.

I did not inquire into that, I’m sorry.

Q.
You didn’t make any inquiry. You don’t know if
there’s
any
document
retention
policy,
you’ve
testified to that earlier; correct?
A.

Right, that’s correct.

Q.
And you don’t know where, if at all,
Resolution Law Group maintains business records?
A.

The

That’s correct.

(Id. at 36, 40).

Moreover, with regard to several specifically

noticed topics, such as (17) “Payments from plaintiffs of the
lawsuits [against First Mariner] and the terms of engagement,”
and (22) “your offices, including staff, support, and record
keeping,” Mr. Broderick lacked even basic knowledge regarding
RLG as an organization, for example:
Q.

You don’t have a file for Mr. Abraham?

A.
I don’t know the extent to which Mr. Abraham has
a file
...
Q.
And you don’t know where, if at all, The
Resolution Law Group maintains business records?
A.

That’s correct.

(Id. at 39, 40).
and

founder

of

It defies logic that Mr. Broderick, the owner
RLG,

could

possess
37

as

little

knowledge

and

understanding of RLG’s operations as his deposition testimony
would suggest.

Accordingly, the Court finds that Defendants

failed to satisfy their duty to present a prepared Rule 30(b)(6)
witness for deposition.
Turning
courts

to

to

the

impose

issue

of

sanctions

sanctions,

against

a

Rule

37(d)
if

party

permits
“person

a

designated under Rule 30(b)(6)...fails, after being served with
proper

notice,

to

appear

for

that

person’s

deposition.”

“Producing an unprepared witness is tantamount to a failure to
appear.”

Taylor, 166 F.R.D. at 362 (citing Resolution Trust

Corp. v. Southern Union, 985 F.2d 196, 197 (5th Cir. 1993));
International
(awarding
present

Ass’n

of

sanctions
a

Machinists,

pursuant

prepared

to

30(b)(6)

390

Rule

F.

Supp.2d

37(d)

witness).

for

at

489-90

failure

Pursuant

to

to
Rule

37(d)(3), “[s]anctions may include any of the orders listed in
Rule 37(b)(2)(A)(i)-(vi)” and “[i]nstead of or in addition to
these sanctions, the court must require the party failing to
act,

the

attorney

reasonable

advising

expenses

that

including

party,

attorney’s

or

both

fees,

to

pay

caused

the

by

the

failure, unless the failure was substantially justified or other
circumstances make an award of expenses unjust.”
the

Court

finds

an

award

of

reasonable

Accordingly,

expenses

including

attorney’s fees would seem mandatory, see International Ass’n of
Machinists,

390

F.

Supp.2d

at
38

489,

and

other

additional

sanctions
Court

are

will

likewise

address

warranted.

all

of

However,

Defendants’

as

noted

sanctionable

supra,
conduct

before turning to what sanctions are appropriate at this stage
of the case.
iii.

Failure to Respond to Interrogatories

Lastly, Plaintiff’s motion for sanctions seeks appropriate
sanction

for

Defendants’

November

22,

2013,

Defendants
motion,
most

offer

stating

recent

little

of

to

interrogatories.

only

set

failure

by

way

“Defendants

respond
(ECF

of

interrogatories.

No.

response

have

to

238-1,
to

answered
There

Plaintiff’s
16-17).

Plainfiff’s

[P]laintiff’s

are

currently

interrogatories to which answers have not been provided.”
No.

246).

In

Plaintiff’s

fact,

Defendants

interrogatories

served

their

with

opposition to the present motion, on March 21, 2014.
251-1; ECF No. 251-2).
served

nearly

four

(ECF

responses

contemporaneously

no

to

their

(ECF No.

As such, Defendants’ responses were

months,

to

the

day,

after

Plaintiff’s

interrogatories were first served (and were served only after
Plaintiff filed a motion for sanctions).6
Having

considered

Plaintiff’s

Defendants’

responses

and

objections,

Defendants’

response

inadequate.

6

interrogatories
the
The

Court
November

and
finds
22,

Fed. R. Civ. P. 33(b)(2) requires that the responding party serve its
answers and objections to interrogatories within 30 days after being served,
absent a stipulation pursuant to Rule 29 or a court order.

39

interrogatories request relevant information.

The profits and

revenue generated from the advertisements, as well as the costs
incurred

in

pursuing

the

lawsuits

against

Plaintiff,

are

relevant to Plaintiff’s false advertising claim and Plaintiff is
entitled

to

boilerplate

responses.
objections,

In

some

which,

waiver and compels answers.

by

cases

Defendants

themselves,

can

asserted
act

as

a

Mezu v. Morgan State University,

269 F.R.D. 565, 573-4 (D. Md. 2010).

It is never enough for a

party resisting discovery to simply proclaim irrelevance, but
must “explain precisely why its objections are proper.”

United

Oil Co., Inc. v. Parts Assocs., Inc., 227 F.R.D. 404, 409 (D.
Md.

2005).

Moreover,

Defendants

respond

evasively

to

the

specific questions asked by Plaintiff’s interrogatories.

For

example,

Mr.

with

regard

to

the

interrogatories

directed

to

Broderick:
21. State the amount of revenue generated from
April Advertisement, the May Advertisement, and
other Advertisements or promotional publications
reference Plaintiff in any manner and identify
documents reflecting such revenue.
(ECF

No.

238-5,

7).

After

interposing

various

the
any
that
all

boilerplate

objections, Mr. Broderick responded that “this defendant has not
received any such revenue.”

(ECF No. 251-1, 4).

clearly

what

does

interrogatory.

not

address

is

actually

This response
asked

in

the

Mr. Broderick was not asked what revenue he

40

“personally”

received.

Mr.

Broderick’s

responses

additional two interrogatories are equally evasive.
RLG’s

responses

to

identical

interrogatories

to

the

Defendant
are

more

informative, providing some information as to revenue generated
from

mailers

involving

First

Defendants
figures

and

costs

Mariner.

decline

to

described

elements

of

incurred

identify

for

costs

(ECF

or

revenues

in

No.
any

251-2,

costs

the

lawsuits

4-6).

documents

and

deductions

pursuing

reflecting

the

describe

the

or

claimed.

However,

(Id.)

Thus,

Defendants’ incomplete responses, provided only after the threat
of Plaintiff’s motion for sanctions, require further elaboration
to be truly adequate.
Fed. R. Civ. P. 37(d) likewise authorizes imposition of the
sanctions

listed

in

Rule

37(b)(2)(A)(i)-(vi)

for

a

party’s

failure to respond to interrogatories and further mandates an
award

of

fees

unless

the

party’s

failure

to

respond

was

substantially justified or other circumstances make an award of
fees unjust.
The

Court

shall

now

turn

to

address

the

issue

of

appropriate sanctions.
B. Sanctions
Courts may order dismissal or judgment by default “when a
party deceives a court or abuses the process at a level that is
utterly inconsistent with the orderly administration of justice
41

or undermines the integrity of the process.”

Projects Mgmt, 734

F.3d at 366 (quoting Shaffer Equip., 11 F.3d at 462).

Courts’

authority

to

to

including

default

sources.

impose
or

sanctions

against

dismissal,

a

derives

party,
from

up
two

and

primary

First, if a party violates a court order or disrupts

the court’s discovery plan, Fed. R. Civ. P. 37 grants courts
wide discretion to impose sanctions, including default.
Fed. Sav., 872 F.2d at 92; Anderson, 155 F.2d at 504.

Mutual
However,

when the sanction involved is judgment by default, the court’s
“’range

of

discretion

is

more

narrow’

because

the

district

court’s desire to enforce its discovery orders is confronted
head-on by the party’s rights to a trial by jury and a fair day
in court.”

Mutual Fed. Sav., 872 F.2d at 92 (quoting Wilson v.

Volkswagen of America, Inc., 561 F.2d 494, 503-04 (4th Cir.
1977)).

Accordingly,

these

competing

interests

require

the

consideration of a four-part test:
(1) Whether the noncomplying party acted in bad faith;
(2) the amount of prejudice his noncompliance caused
his adversary, which necessarily includes an inquiry
into the materiality of the evidence he failed to
produce; (3) the need for deterrence of the particular
sort of noncompliance; and (4) the effectiveness of
less drastic sanctions.
Id.; Anderson, 155 F.2d at 504.

Second, “due to the very nature

of the court as an institution it must and does have an inherent
power to impose order, respect, decorum, silence, and compliance

42

with lawful mandates,” which includes the authority to order
default or dismissal.

Projects Mgmt, 734 F.3d at 373 (quoting

Shaffer Equip., 11 F.3d at 462).
inherent

power

to

assess

the

Yet, before exercising its

“most

extreme

sanctions,”

i.e.

dismissal without considering the merits or entry of judgment by
default, a court must similarly weigh the following factors:
(1) the degree of the wrongdoer’s culpability; (2) the
extent of the client’s blameworthiness if the wrongful
conduct is committed by its attorney, recognizing that
we seldom dismiss claims against blameless clients;
(3) the prejudice to the judicial process and
administration of justice; (4) the prejudice to the
victim; (5) the availability of other sanctions to
rectify the wrong by punishing culpable persons,
compensating harmed persons, and deterring similar
conduct in the future; and (6) the public interest.
Projects Mgmt., 734 F.3d at 373-74 (quoting Shaffer Equipment,
11 F.3d at 462-63).
Plaintiff has urged the Court to impose the severe sanction
of entry of default judgment as to liability on all counts of
the amended complaint —— Count I (Lanham Act violations, namely
false advertising), Count II (defamation), and Count III (unfair
competition).

Having

considered

Defendants’

history

of

egregious discovery misconduct coupled with Defendants’ latest
bad

faith

spoliation

discovery
of

abuse,

evidence,

the

in

particular

Court

agrees

Defendants’
that

clear

judgment

by

default as to liability for all counts of Plaintiff’s amended
complaint is warranted.
43

Here, Defendants’ discovery misconduct implicates both the
Court’s inherent power to uphold the integrity of the judicial
process

(due

to

Defendants’

spoliation)

and

the

Court’s

authority, pursuant to Fed. R. Civ. P. 37, to control discovery
(due to defendants repeated failure to comply with discovery
orders, including most recently, failure to present a prepared
Rule

30(b)(6)

witness

interrogatories).

and

failure

to

respond

to

As such, the Court has considered the related

factors for assessing the sanction of default judgment in these
contexts

and

finds

that

they

overwhelmingly

support

such

a

sanction here.
Defendants

have

repeatedly

demonstrated

their

bad

faith

throughout discovery in this case.

As exhaustively recounted

herein,

and

since

Defendants

its

have

inception,

obfuscated

most

recently

obstructed

through

Mr.

discovery
Broderick’s

woefully inadequate deposition, Defendants’ failure to respond
for

four

months

(Defendants’

to

actual

Plaintiff’s
responses

November

22,

necessitating

interrogatories

supplementation),

and (most egregiously) spoliation of Mr. Broderick’s computer
and smartphone.7

As a result, Plaintiff has been manifestly

7

The Court also acknowledges herein that, at bottom, Mr. Broderick’s bad
faith spoliation of his laptop and smartphone, alone, would be a sufficient
basis to order the sanction of default judgment as to Counts I (Lanham Act
violations, namely false advertising) and III (unfair competition).
“The
harshest sanctions may apply not only when both severe prejudice and bad
faith are present, but also when, for example, culpability is minimally
present, if there is a considerable showing of prejudice, or, alternatively,
the prejudice is minimal but the culpability is great” Victor Stanley, 269

44

prejudiced, both through undue delay and increased expense8 and
inability

to

obtain

evidence

necessary

to

present

its

case.

Likewise, the need for deterrence here is great, “[t]o find
otherwise would be to send the opposite message that the court
may be pushed, ignored and defied to the outermost limits so
long as the noncomplying party has even an inadequate fallback
act ready in the wings should the final curtain be falling.”
Mutual Fed. Sav., 872 F.2d at 94.
subject

to

expenses

numerous

totaling

sanctions,

$25,721.00,

Defendants have already been

including
adverse

attorney’s

jury

fees

and

instructions,

and

preclusion of additional evidence at trial regarding specific
issues.
in

no

Further, the Court has specifically warned Defendants
uncertain

terms

and

as

early

as

June

13,

2013,

that

F.R.D. at 533; Silvestri, 271 F.3d at 593 (finding that severe sanctions,
including dismissal, are “usually justified only in circumstances of bad
faith or other ‘like action’ ... [b]ut even when conduct is less culpable,
dismissal may be necessary if the prejudice to the [non-spoliating party] is
extraordinary, denying it the ability to adequately defend [or present] its
case”) (citing Cole v. Keller Indus., Inc., 132 F.3d 1044, 1047 (4th Cir.
1998)). Here, culpability and prejudice——as to Plaintiff’s false advertising
and unfair competition claims——are great. Defendants acted with bad faith in
destroying the only identified source of records pertaining to the operations
of RLG and whether Defendants ever intended or was capable of pursuing a bona
fide lawsuit on behalf of the recipients of the mailers it distributed.
8
See Anderson, 155 F.3d at 503-04 (affirming the district court’s sanction of
default judgment, finding that the defendants had “stonewalled discovery from
the inception of the lawsuit,” and prejudiced the plaintiff through increased
expense, annoyance, and delay in prosecuting the case); Daye v. General
Motors Corp., 172 F.R.D. 173, 176-78 (M.D.N.C. 1997)(entering the sanction of
dismissal with prejudice following the plaintiff’s repeated failure provide
discovery and meet deadlines); Aerodyne Systems Eng., Ltd v. Heritage Int’l
Bank, 115 F.R.D. 281, (D. Md. 1987)(entering the sanction of dismissal with
prejudice, finding “[t]here is no doubt that Aerodyne’s delinquent and
inadequate interrogatories and document responses have resulted in prejudice
to Heritage by preventing it from conducting discovery, evaluating the merits
of the claims against it, and from adequately preparing its defense in this
matter. Furthermore, Heritage has been put to considerable additional time
and expense of preparing several motions to compel discovery.”).

45

continued

discovery

abuse

could

Judgment.

(ECF

121);

see

No.

lead

to

entry

Anderson,

155

of

default

F.3d

at

504

(acknowledging that a Court must make the threat of default
judgment

clear)

(citing

Hathcock

v.

Navistar

Corp., 53 F.3d 36, 40 (4th Cir. 1995)).

Int’l

Defendants’ discovery

misconduct, however, has continued unabated.
sanctions

have

not

been

an

Transp.

effective

Clearly, lesser

deterrence

for

these

Defendants.
Discovery in this case has been ongoing for 16 months and
due to Defendants’ repeated and ongoing discovery misconduct,
this

case

has

taken

resources,

and

substantive

prejudice

stymied

at

subpoenas
claims.

-

an

resulted

every
to

up

get

to

turn
the

inordinate

in

amount

significant

of

procedural

Plaintiff.

The

–

discovery,

written

evidence

it

Plaintiff

needs

judicial

to

and

has

been

depositions,
prosecute

its

Plaintiff has been forced to engage in largely futile

negotiations with Defendants’ seriatim counsel and, expensive,
and

distracting

discovery

to

motions

which

it

practice
is

in

entitled

an

attempt

and

to

which

get

it

the

needs.

Accordingly, I recommend the sanction of judgment by default as
to liability on all counts of the amended complaint —— Count I
(Lanham

Act

violations,

namely

false

advertising),

(defamation), and Count III (unfair competition).

Count

II

The facts of

this case speak so clearly to Defendants’ egregious misconduct
46

that

judgment

complaint

is

by
both

default

as

necessary

to
to

all

counts

uphold

the

of

the

integrity

amended
of

the

judicial process and squarely within the Court’s discretion.
C. Default Judgment
i.

Standing

Defendants principally argue in opposition to Plaintiff’s
motion for sanctions that this Court cannot enter a default as
to

Counts

I

(Lanham

Act,

namely

false

advertising)

and

III

(unfair competition) because Plaintiff lacks standing to bring
those claims.

(ECF No. 246, 2-12).

Defendants, however, have

already challenged Plaintiff’s standing to bring Counts I and
III in prior motions to dismiss (ECF No. 36, 42).

Judge Garbis

has ruled on Defendants’ motions to dismiss, denying them as to
all counts, including Defendants’ challenges to standing.
No. 60, 21-25).

(ECF

However, because the Court has reasoned that

the sanction of judgment by default is necessary, the Court
shall address the assertions raised in Defendants’ opposition to
the present motion and consider whether Plaintiff rightly has
standing

to

make

Lanham

Act

and

Maryland

unfair

competition

claims against Defendants.
First, the Court quickly rejects Defendants’ challenge to
Plaintiff’s unfair competition claim, Count III, as Judge Garbis
has clearly ruled on this issue.

Defendants’ opposition to the

present motion for sanctions re-raises Defendants’ contention
47

that Plaintiff and Defendants are not competitors, and thus,
Plaintiff lacks standing to pursue a Maryland unfair competition
claim.

(ECF No. 246, 10-15).

Judge Garbis, however, has held

as follows:
Under Maryland law, a plaintiff need not be in
competition with the defendant to have standing to
pursue an unfair competition claim. See, e.g.,
Cloverleaf Enters. v. Md. Thoroughbred, Horsemen’s
Ass'n., 730 F. Supp. 2d 451, 467 (D. Md. 2010)
(denying motion to dismiss unfair competition claim by
racetrack owner against horsemen and jockeys); Sun
Dun, Inc. of Wash. v. Coca Cola Co., 740 F. Supp. 381,
397 (D. Md. 1990) (denying motion to dismiss unfair
competition claim by vendor against drink manufacturer
and distributor).
Therefore, First Mariner's unfair competition
claim will not be dismissed for lack of standing.
(ECF No. 60, 24-25).

Defendants have not cited any recently

decided Maryland case law as a basis for the reconsideration of
Judge

Garbis’

decision,

Defense

counsel

acknowledged

as

much

during this Court’s April 9, 2014, hearing on the present motion
(ECF

No.

253).

Accordingly,

Defendants’

second

effort

at

obtaining dismissal of Plaintiffs’ unfair competition claim is
rejected.
Second,

Defendants

challenge

Plaintiff’s

standing

to

maintain a false advertising claim pursuant to the Lanham Act,
15 U.S.C. § 1125(a), similarly, because Plaintiff and Defendants
are not competitors.

(ECF No. 246, 2-10).

48

This issue was

likewise before Judge Garbis on motions to dismiss.
60).

In

deciding

Defendants’

prior

motions,

(ECF No.

Judge

Garbis

acknowledged that the federal circuits which have addressed this
issue

have

differing

views

as

to

the

necessity

of

“competition” component to establish a Lanham Act claim.
at 21).

a

(Id.

Judge Garbis went on to explain that various circuits

have adopted varying “tests” to assess whether a plaintiff has
standing to bring a Lanham Act claim, each informed, in part, by
the circuit’s view as to the “competition” component. (Id. at
21-22) (collecting cases).

Although, perhaps providing a hint

of its views in dicta, the Fourth Circuit had not definitively
addressed

the

matter

and

district

courts

within

Circuit have taken varying approaches to the issue.9
23).

the

Fourth

(Id. at 22-

Ultimately, Judge Garbis determined that “[i]n view of the

absence

of

clear

binding

precedent

and

the

evidentiary

interrelationship between the defamation and Lanham Act claims,
the Court will not dismiss the Lanham Act claim on standing
grounds. However, the standing issue will be considered in due
course at later stages of the instant case.”

(Id. at 24).

later stage, as contemplated by Judge Garbis, has arrived.

9

That
As

See Made in the USA Found. v. Phillips Food, Inc., 365 F.3d 278, 280 (4th
Cir. 2004); See also, e.g., Nemet Chevrolet, Ltd. v. Consumeraffairs.com,
Inc., 564 F. Supp.2d 544, 551-53 (E.D. Va. 2008) aff'd, 591 F.3d 250 (4th
Cir. 2009)(declining to resolve the proper standing analysis); e.g., Va.
Polytechnic Inst. & State Univ. v. Hokie Real Estate, Inc., 813 F. Supp. 2d
745, 757 (W.D. Va. 2011); e.g., Coulibaly v. J.P. Morgan Chase Bank, N.A.,
No. DKC 10-3517, 2011 WL 3476994, at *13 (D. Md. Aug. 8, 2011).

49

such,

Defendants

have

cases

considered

by

Circuit.
Supreme

extensively
Judge

Garbis,

(ECF No. 246, 2-10).
Court

decided

analyzed

and

including

discussed
those

in

the
this

However, On March 25, 2014, the

Lexmark

Int’l,

Inc.

v.

Static

Control

Components, Inc., No 12-873, slip op., 572 U.S. ___ (U.S. March
25,

2014),

directly

addressing

the

standing

issue

under

the

Lanham Act, 15 U.S.C. § 1125(a).
In

Lexmark,

the

Supreme

Court

considered

whether

Static

Control (“the market leader in making and selling the components
necessary to remanufacture Lexmark [printing] cartridges”) had
standing

to

maintain

a

Lanham

and

advertising.

Id. at slip op. 1-2, 4.

Lexmark

(1)

of

claim

manufacturer

that

seller

Act

through

laser

against

printers)

Lexmark
for

(a

false

Static Control alleged

advertisements

for

its

“prebate

program,” purposefully mislead end-users to believe that they
are legally bound by the prebate-terms and are thus required to
return prebate-labeled cartridges to Lexmark after a single use;
and

(2)

sent

letters

to

most

companies

in

the

toner

remanufacturing business falsely advising that it was illegal to
sell refurbished prebate-cartridges and, in particular, that it
was illegal to use Static Control’s products to refurbish those
cartridges.

Id.

at

3.

In

granting

certiorari,

the

Court

addressed the “appropriate analytical framework for determining
a party’s standing to maintain an action for false advertising
50

under the Lanham Act.’” Id. at 5-6 (quoting Pet. for Cert. i;
569 U.S. ___ (2013)).

As such, the Court adopted the following

framework for analyzing statutory standing10

under the Lanham

Act:

only

(1)

the

statutory

cause

of

action

extends

to

plaintiffs whose interests fall within the “zone of interests”
protected by the Act; and (2) the statutory cause of action is
limited to plaintiffs whose injuries are “proximately caused” by
violations of the Act. Id. at 10, 13.

Justice Scalia, writing

for a unanimous Court, held that (1) “to come within the zone of
interests in a suit for false advertising under § 1125(a), a
plaintiff must allege an injury to a commercial interest in
reputation or sales;” and (2) “a plaintiff suing under § 1125(a)
ordinarily
directly

must
from

show

economic

or

the

deception

reputational

wrought

by

injury

the

flowing

defendant’s

advertising; and that that occurs when deception of consumers
causes them to withhold trade from the plaintiff.”

Id. at 13,

15.
Applying this standard to the case before it, the Court
determined that Static Control rightfully had standing to sue
Lexmark under § 1125(a).

Id. at 18.

First, Static control was

“suing not as a deceived consumer but as a ‘person engaged in’

10

Although the parties briefed the issue as one of “prudential standing,” the
Court determined the question presented by the case was more appropriately
referred to as an issue of “statutory standing,” i.e., whether Static Control
falls within the class of plaintiffs which Congressed authorized to sue under
§ 1125(a). Id. at 9 n.4.

51

‘commerce within the control of Congress’ whose position in the
marketplace has been damaged by Lexmark’s false advertising,”
thus,

falling

within

the

“zone

of

interest.”

Id.

at

19.

Second, “although diversion of sales to a direct competitor may
be the paradigmatic direct injury from false advertising, it is
not the only type of injury cognizable under § 1125(a).”
“When

a

defendant

aspersions
directly

on

its

from

statements.”
element

of

disparaged

harms

the

audience’s

reputation

plaintiff’s

belief

in

by

casting

injury

the

flows

disparaging

Static Control satisfied the proximate cause

standing
its

plaintiff’s

business,

the

Id.

a

Id.

by

business

business was illegal.

sufficiently
by

asserting

alleging
that

that

Static

Lexmark
Control’s

Id.

Plaintiff’s claim as set forth in the amended complaint
fits snugly within the Lexmark framework, establishing standing
under the Lanham Act.
result

of

incurred,

Defendants’
and

likely

First, Plaintiff has alleged that as a
false
will

advertising,

continue

to

Plaintiff

incur,

“has

substantial

commercial injury in the form of lost sales, loss of market
share, and damage to reputation and good will.”
37).

(ECF No. 31, ¶

Further, Plaintiff has alleged that Defendants’ mailers

disparaged, and continue to disparage, Plaintiff’s business and
goodwill by confusing and deceiving Plaintiff’s customers into
believing that Plaintiff has engaged in unlawful, deceptive and
52

fraudulent lending practices.

(Id. at ¶¶ 33, 37).

Although the

Lexmark decision was not published until after Defendants filed
their opposition to Plaintiff’s motion for sanctions, Defendants
were

given

the

opportunity

to

discuss

the

implications

of

Lexmark during this Court’s April 9, 2014, hearing (ECF No.
253),

and

did

so.

Having

considered

the

allegations

in

Plaintiff’s amended complaint, the Court finds that Plaintiff
has alleged standing to pursue its false advertising claim under
the Lanham Act.
ii.

Entry of Default Judgment

Finally, Defendants assert that this Court cannot assess
the sanction of judgment by default, because Plaintiff’s amended
complaint fails to allege a concrete or liquidated amount of
damages.

(ECF

No.

246,

1-2).

The

Court

disagrees.

In

reviewing a motion for entry of default judgment, the Court
accepts

as

true

the

well-pleaded

complaint as to liability.

factual

liability

appropriate
Unlike

is

established,

amount

of

allegations

of

damages.
fact

in

the

Ryan v. Homecomings Fin. Network,

253 F.3d 778, 780-81 (4th Cir. 2001).
that

allegations

it

If the Court determines
must

Ryan,

establishing

then
253

determine

F.3d

at

liability,

the

780-81.

the

Court

does not accept factual allegations regarding damages as true,
but rather must make an independent determination regarding such
allegations.

See

Credit

Lyonnais
53

Secs.

(USA),

Inc.

v.

Alcantara, 183 F.3d 151, 154 (2nd Cir. 1999).

In so doing, the

Court

Fed. R. Civ. P.

may

conduct

55(b)(2).

an

evidentiary

hearing.

The Court may also make a determination of damages

without a hearing as long as there is an adequate evidentiary
basis in the record for the award.

See, e.g., Stephenson v. El-

Batrawi, 524 F.3d 907, 917 n.11 (8th Cir. 2008) (“Foregoing an
evidentiary hearing may constitute an abuse of discretion when
the

existing

record

is

insufficient

to

make

the

necessary

findings in support of a default judgment.”); Adkins v. Teseo,
180 F. Supp. 2d 15, 17 (D.D.C. 2001) (finding that a court need
not make determination of damages following entry of default
through hearing, but rather may rely on detailed affidavits or
documentary evidence to determine the appropriate sum).
Accordingly, it is the undersigned’s recommendation that,
pursuant

to

Fed.

R.

Civ.

P.

55(b)(2),

that

an

evidentiary

hearing be held to give Plaintiff the opportunity to prove its
damages, or, alternatively, give the parties the opportunity to
submit

briefing

documentary

(which

evidence)

is
to

to

include

permit

the

detailed
Court

to

affidavits
determine

or
the

appropriate sum of damages.11

11

Also to be considered through briefing or at an evidentiary hearing is the
issue of attorneys’ fees and costs flowing from Defendants’ failure to
respond to interrogatories or prepare a Rule 30(b)(6) designee for
deposition, see Fed. R. Civ. P. 37(d)(3), allowing consideration of whether
the circumstances exist which would make an award of expenses unjust.

54

III.

Conclusion
Having considered Plaintiff’s motion for sanctions (ECF No.

238), it is hereby RECOMMENDED that:
1.

Plaintiff’s motion for sanctions be GRANTED;

2.

Judgment by default be entered against Defendants as to
all counts of Plaintiff’s amended complaint;

3.

The Court hold an evidentiary hearing, pursuant to Fed.
R.

Civ.

P.

55(b)(2)

in

order

to

give

Plaintiff

the

opportunity to prove its damages, or, alternatively, the
parties

be

given

the

opportunity

to

submit

briefing

(which is to include detailed affidavits or documentary
evidence) in order to permit the Court to determine the
appropriate sum of damages.

Date: __4/22/2014__

_______________/s/______________
Susan K. Gauvey
United States Magistrate Judge

55