U.S. Home Corporation v. Settlers Crossing, L.L.C. et al

Filing 548

MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 7/15/13. (sat, Chambers)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
U.S. HOME CORPORATION
:
v.

:

Civil Action No. DKC 08-1863

:
SETTLERS CROSSING, LLC, et al.
:
MEMORANDUM OPINION
Presently pending and ready for review in this suit for
breach

of

contract,

fraud,

and

declaratory

judgment

is

the

objection of Defendant-Counter Claimant iStar Financial, Inc.
(“iStar”) (ECF No. 508), to Magistrate Judge Connelly’s April
11,

2013

Order

wholly-owned
“Lennar”)

objection.

No.

subsidiary,

have

connection

(ECF

with

also
the

505).
U.S.

filed
papers

(ECF No. 515).

a

Lennar

Home

Corporation

motion

filed

Corporation

in

to

seal

connection

and

(collectively,
documents
with

in

iStar’s

The issues have been briefed, and

the court now rules, no hearing being deemed necessary.
Rule 105.6.

its

Local

For the following reasons, the objection will be

sustained, and the dispute will be remanded to Judge Connelly.
I.

Background1
This case was referred to Magistrate Judge Connelly for

resolution of all discovery disputes and for determination of

1

A complete recitation of the underlying facts in this case
is available at U.S. Home Corp. v. Settlers Crossing, LLC, No.
DKC 2008-1863, 2010 WL 958034 (D.Md. Mar. 11, 2010).

non-dispositive matters.

On July 16, 2012, iStar filed a motion

for sanctions against Lennar, pursuant to Federal Rule of Civil
Procedure 37, based on Lennar’s alleged failure to comply with
certain of Judge Connelly’s discovery orders.

(ECF No. 427).

In that motion, iStar requested, among other things, that a
number of critical facts be deemed established for the purpose
of the litigation, that it be permitted to re-depose any of
Lennar’s

former

or

current

employees

that

it

had

already

deposed, and that it be awarded costs, expenses, and attorneys’
fees

related

to

the

filing

of

its

sanctions

motion

discovery orders referenced in the sanctions motion.

and

all

(Id. at 5-

6).
On December 3, 2012, Judge Connelly granted in part, denied
in part, and held in abeyance iStar’s motion, because he had
“insufficient information” to determine whether Lennar violated
a number of discovery orders.

(ECF No. 495).

On April 11,

2013, Judge Connelly revisited the sanctions motion and found
that Lennar violated discovery orders of March 9, 2012 (ECF No.
359) and April 27, 2012 (ECF No. 385), and imposed sanctions
(ECF No. 505).

iStar now objects to Judge Connelly’s ruling to

the extent that it failed to award attorneys’ fees or other
evidentiary
opposed

the

sanctions.
objections

replied (ECF No. 518).

(ECF
(ECF

No.
No.

508).
516),

On
and

on

May

16,

June

3,

Lennar
iStar

Simultaneous with the filing of Lennar’s

2

opposition, it filed a motion to seal, which was unopposed.
(ECF No. 515).
Litigation between these parties began on December 6, 2007,
when Settlers Crossing, LLC, filed suit against Lennar and U.S.
Home

in

the

United

District

of

Virginia,

determine

which

contract

the

Crossing,

seeking

action

iStar,

transaction.

a

for

declaratory
of

That

a
suit

the

Eastern

judgment

to

real

estate

sale

has

since

been

On July 17, 2008, U.S. Home commenced

by
and

Court

precedent

unsatisfied.

(ECF No. 98).

instant

District

conditions

remained

dismissed.

States

filing

a

other

complaint

parties

to

against
the

Settlers

real

estate

(ECF No. 1).

Robert Jacoby was the former president of Lennar’s Maryland
division, which was overseeing the real estate transaction at
issue in the litigation.
key witness.

The parties agree that Mr. Jacoby is a

In response to discovery propounded by iStar and

others in September and November of 2009, Lennar represented
that it had produced all documents related to the property.

On

August 12, 2011, a few days before Mr. Jacoby’s deposition,
Lennar

discovered

information.
additional

additional

encrypted,

electronically

stored

This discovery resulted in the production of an

1,100

documents

and

after Mr. Jacoby’s deposition.

over

136,000

pages

to

iStar,

Mr. Jacoby died of cancer in

October 2011.

3

Among the documents produced were many that Judge Connelly
deemed to be excessively redacted, and he ordered Lennar to
reproduce the documents without redactions.

(ECF No. 359).

response

produced

to

documents.

this

order,

Lennar

(ECF No. 505, at 3).

again

In

redacted

On September 6, 2012 and again

on April 11, 2013, Judge Connelly ordered Lennar to produce
unredacted documents.

(ECF Nos. 455 & 505).

Separately, in an earlier discovery order of May 7, 2010,
consistent with iStar’s interrogatories, Judge Connelly ordered
Lennar to “compile a list of pending cases regarding contract
disputes or breach of contract claims.”

(ECF No. 114 ¶ 7).

In

response, Lennar provided a list of litigation 157 pages long.
On June 9, 2010, Judge Connelly narrowed the scope of the Order
to include only those cases related to the termination of or
failure to consummate a transaction for the acquisition of real
property.

(ECF No. 126 ¶ 5).

Lennar’s response to both orders

excluded U.S. Home Corp. v. Powers, WMN-09-cv-2807.

The Powers

litigation was filed on behalf of Lennar by the same counsel who
represented

Lennar

here

and

involved

the

rescission

of

an

agreement to acquire real property, squarely within the scope of
the original interrogatory, even as narrowed by the Orders.2
Judge Connelly concluded that the fact that counsel “did not
disclose the relevant Powers litigation but disclosed [other]

2

This counsel has since withdrawn from representation of
Lennar. (ECF No. 512).
4

non-relevant

Powers

litigation

is

indicative

of

bad

faith.”

(ECF No. 505, at 15).
To

remedy

the

prejudice

caused

by

Lennar’s

delay

in

producing unredacted documents and its delay in disclosing the
relevant

Powers

December

3,

sanctions

litigation,

2012,

and

granted

permitted

Judge
a

Connelly,

portion

iStar

to

of

in

the

iStar’s

re-depose

any

order

motion
of

of
for

Lennar’s

current or former employees whose depositions had already been
taken, and awarded costs, expenses, and attorneys’ fees related
to the taking of these second depositions.
II.

(ECF No. 495 ¶ 25).

Standard of Review
Under 28 U.S.C. § 636(b)(1)(A), non-dispositive pretrial

matters may be referred to a magistrate judge for hearing and
determination.

A district judge may modify or set aside any

portion of a magistrate judge’s non-dispositive ruling “where it
has been shown that the magistrate judge’s order is clearly
erroneous
72(a).
or

or

contrary

to

law.”

Id.;

see

also

Fed.R.Civ.P.

“The [district] judge may also receive further evidence

recommit

instructions.”

the

matter

to

the

magistrate

judge

28 U.S.C. § 636(b)(1)(C).

Under the clearly erroneous standard, the
reviewing court is not to ask whether a
finding is the best or only conclusion
permissible based on the evidence.
Nor is
it to substitute its own conclusions for
that of the magistrate judge.
See Tri–Star
Airlines, Inc. v. Willis Careen Corp., 75
F.Supp.2d
835,
839
(W.D.Tenn.
1999).
Rather, the court is only required to
5

with

determine whether the magistrate judge's
findings are reasonable and supported by the
evidence.
Id.
“It is not the function of
objections to discovery rulings to allow
wholesale relitigation of issues resolved by
the magistrate judge.”
Buchanan v. Consol.
Stores Corp., 206 F.R.D. 123, 124 (D.Md.
2002).
Int’l Ass’n of Machinists & Aerospace Workers v. Werner–Masuda,
390 F.Supp.2d 479, 485 (D.Md. 2005).
III. Analysis
Two portions of Judge Connelly’s ruling are at issue here:
first, his finding that Lennar withheld documents and improperly
redacted documents when they were ultimately produced; second,
his

finding

that

Lennar

acted

in

bad

faith

by

failing

to

disclose to iStar similar litigation that it had filed in this
court.
iStar argues that Judge Connelly clearly erred when he did
not award attorneys’ fees and expenses related to its sanctions
motion (ECF No. 427) and to its motions that resulted in the
discovery orders of June 9, 2010, May 10, 2011, March 9, 2012,
and April 27, 2012.
that

he

erred

appropriate

in

by

(ECF No. 508, at 20).
finding

spite

of

that

Lennar’s

disclose the Powers litigation.
the

failure

to

produce

no

It further argues

evidentiary

bad

faith

in

relief
failing

was
to

Specifically, iStar argues that

unredacted

documents

and

the

Powers

litigation harmed it irreparably, in light of its inability to
depose Mr. Jacoby about the withheld material.
6

Therefore, it

concludes that Lennar should be deemed to have admitted a number
of critical facts that Lennar argues would decide the case in
iStar’s

favor.

Lennar

responds

that

the

sanctions

Judge

Connelly awarded were appropriate under Rule 37, and that no
further fees or evidentiary sanctions are merited.
A.

Attorneys’ Fees

Judge Connelly awarded costs, expenses, and attorneys’ fees
related

only

employees;
incurred
orders.

to

his
in

iStar’s

taking

second

decision

was

silent

as

litigating

the

sanctions

depositions
to

fees

motion

of

and
and

Lennar

expenses
discovery

(ECF No. 495 ¶ 25).

Rule

37

requires

a

court

to

award

certain

reasonable

attorneys’ fees and expenses when a party has failed to comply
with a court order.

Rule 37(b)(2)(C) provides:

Payment of Expenses.
Instead of or in
addition to the orders above, the court must
order the disobedient party, the attorney
advising that party, or both to pay the
reasonable expenses, including attorney’s
fees, caused by the failure, unless the
failure was substantially justified or other
circumstances make an award of expenses
unjust.
The order of April 11 was silent as to the attorneys’ fees,
expenses, and costs that iStar requested associated with its
litigation of the sanctions motion and motions to compel.

It is

not clear whether Judge Connelly made any finding whether the
requested fees and expenses were caused by Lennar’s failure to
comply with the discovery orders, and whether its failure was
7

substantially justified.

Similarly, in Sea Star Line, LLC v.

Emerald

Inc.,

Equip.

Leasing,

No.

05-245,

2009

WL

3200657

(D.Del. Oct. 6, 2009), the district judge sustained an objection
to

the

amount

pursuant

to

of

Rule

sanctions

awarded

37(b(2)(c)

by

because

the
the

magistrate
magistrate

judge
failed

“expressly [to] consider the substantial justification standard
in

imposing

sanctions

and

to

provide

precise

and

detailed

support for an imposition of sanctions,” including an analysis
of the defendant’s attorneys’ fees and expenses associated with
the plaintiff’s failure to obey a discovery order.

Id. at *2.

The district judge remanded the objection to the magistrate and
instructed

that

“‘the

imposition

of

sanctions

requires

an

individualized analysis,’ and must be sufficiently detailed in
all

respects,

including

the

imposition

of

the

amount

of

sanctions, as well as in the rationale concluding that an award
of sanctions is justified in the first instance.”

Id. (quoting

Grider v. Keystone Health Plan Cent. 580 F.3d 119, 144 (3d Cir.
2009)).

Accordingly, iStar’s objection will be sustained and

the issue remanded to Judge Connelly to assess the parties’
arguments and determine whether an award of costs and fees is
warranted under Rule 37.
B.

Evidentiary Sanctions

iStar also argues that Judge Connelly erred by failing to
deem

many

critical

facts

resolved

sanction for Lennar’s misdeeds.

in

iStar’s

favor,

as

a

Specifically, it seeks to have
8

the

court

deem

litigation,
overall

admitted

other

business

that

lawsuits,
strategy

Lennar

and
to

“instituted

this

avoid

action
Lennar’s

the

as

part

Powers
of

an

obligations

to

purchase . . . land and put or keep such land on its books.”
(ECF No. 508, at 21).
that

Lennar,

on

a

iStar also requests that the court find

number

of

occasions,

“failed

to

satisfy

conditions precedent” in bad faith and to delay the settlement
date of the land purchase, to avoid its obligations under the
contract.

(Id.).

Lennar,

in

turn,

contends

that

Judge

Connelly’s sanction of granting iStar additional depositions and
ordering

the

production

of

unredacted

documents

was

narrowly

targeted to address the harms iStar suffered.
In

his

request

for

April

11

evidentiary

Order,

responding

sanctions,

Judge

to

iStar’s

Connelly

initial

noted

only

that “[t]here is no particular relief the Court can provide to
iStar at this stage of this litigation for Lennar’s deliberate
non-compliance with this Court’s Orders.”

(ECF No. 505 ¶ 10).

Rule 37(b)(2)(A) provides:
If a party or a party’s officer, director,
or managing agent -- or a witness designated
under Rule 30(b)(6) or 31(a)(4) -- fails to
obey
an
order
to
provide
or
permit
discovery, . . . the court where the action
is pending may issue further just orders.
They may include . . .
(i) directing that the matters embraced in
the order or other designated facts be taken
as established for purposes of the action,
as the prevailing party claims;
9

(ii) prohibiting the disobedient party from
supporting or opposing designated claims or
defenses, or from introducing designated
matters in evidence; . . . .
A court has discretion regarding the imposition of additional
sanctions under Rule 37.

See Nat’l Hockey League v. Metro.

Hockey Club, Inc., 427 U.S. 639, 642-43 (1976).

In exercising

its discretion under Rule 37(b)(2)(A), the court generally must
consider:

“(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
noncompliance, and (4) whether less drastic sanctions would have
been effective.”

Anderson v. Found. for Advancement, Educ, &

Emp’t of Am. Indians, 155 F.3d 500, 504 (4th Cir. 1998) (citing
Wilson v. Volkswagen of Am., Inc., 561 F.2d 494, 503–05 (4th Cir.
1977)).
The

record

participation

in

shows

that

Lennar

the

Powers

deliberately

litigation,

behavior

Connelly found to be indicative of bad faith.
that

Judge

sanctions.
the

Connelly

considered

the

withheld

full

that

its

Judge

It is not clear

range

of

available

Accordingly, this objection will be sustained and

issue

remanded

to

him

to

consider

reasonable

sanctions

consistent with Rule 37.
C.

Motion to Seal

Lennar has filed an unopposed motion pursuant to Local Rule
105.11

and

the

Stipulated

Order
10

Regarding

Confidentiality

of

Discovery
Material
seal:

Material
(ECF

No.

and
113)

Inadvertent
(the

Disclosure

“Protective

of

Order”),

Privileged
seeking

to

(1) iStar’s memorandum in support of its objection to the

April 11 Order (ECF No. 508); (2) exhibits three, four, and six
to iStar’s objection (ECF Nos. 508-2, 508-2, & 508-3); and (3)
its opposition to iStar’s objection (ECF No. 516).
515).

(ECF No.

iStar notes in both its objection and reply to Lennar’s

opposition that it files these documents and attached exhibits
under seal in an abundance of caution
because:
(i) the Magistrate [Judge] filed
the Sanctions Order, which is quoted herein,
under seal; and (ii) the [papers] reflect[]
and refer[] to language from documents
[Lennar] has designated as confidential.
iStar will [] defer to Lennar as to whether
it wants to file a motion to maintain the
[papers], in whole or in part, under seal.
(ECF Nos. 508, at 2 n.1, & 518, at 1 n.1).
A motion to seal must comply with Local Rule 105.11,
which provides:
Any motion seeking the sealing of pleadings,
motions, exhibits or other papers to be
filed in the Court record shall include
(a) proposed reasons supported by specific
factual
representations
to
justify
the
sealing
and
(b)
an
explanation
why
alternatives to sealing would not provide
sufficient protections.
The Court will not
rule upon the motion until at least 14 days
after it is entered on the public docket to
permit
the
filing
of
objections
by
interested parties.
Materials that are the
subject
of
the
motion
shall
remain
temporarily sealed pending a ruling by the
Court.
If the motion is denied, the party
making
the
filing
will
be
given
an
opportunity to withdraw the materials.
11

This rule endeavors to protect the common law right to
inspect and copy judicial records and documents, Nixon v. Warner
Commc’ns, Inc., 435 U.S. 589, 597 (1978), while recognizing that
competing

interests

sometimes

outweigh

the

public’s

right

of

access, In re The Knight Publ’g Co., 743 F.2d 231, 235 (4th Cir.
1984).
Before sealing any documents, the non-moving party must be
provided with notice of the request to seal and an opportunity
to object.

Id.

This requirement may be satisfied either by

notifying the persons present in the courtroom or by docketing
the motion “reasonably in advance of deciding the issue.”
at 234.

Id.

Finally, less drastic alternatives to sealing, such as

filing redacted versions of the documents, should be considered.
If the court decides that sealing is appropriate, it should also
provide reasons, supported by specific factual findings, for its
decision to seal and for rejecting alternatives.

Id. at 235.

Both parties note that Judge Connelly filed the April Order
under seal, and that the order refers to details of documents
that

contain

Lennar.

sensitive

Because

the

business

and

objection,

financial

opposition,

information
and

reply

of
all

reference that Order extensively, the parties seem to agree that
those papers should be sealed.3

3

Lennar notes that exhibits three

Lennar’s motion to seal was filed before iStar filed its
reply. iStar filed the reply under seal and deferred to Lennar
as to whether it should remain under seal. (ECF No. 518, at 1
12

and four to iStar’s objection are the mission statement for
Lennar’s

Maryland

analysis

of

the

Division,
real

estate

which

include

market

and

a

confidential

Lennar’s

specific,

ongoing long-term strategic plan with respect to that analysis.
(ECF No. 515, at 3).
list

of

properties

regarding

numerous

Lennar also notes that exhibit six is a
that

includes

transactions

confidential

in

which

information

Lennar

remains

involved.
Because

Lennar

lays

out

the

reasons

that

should be sealed, its motion will be granted.

the

documents

Lennar emphasizes

that the objection, opposition, and exhibits contain proprietary
business information and sensitive financial information that
remains relevant to their business.

Lennar also avers that this

sensitive information pervades these documents and that there is
no less restrictive alternative to sealing.

Thus, these papers

and exhibits will be sealed as Lennar suggests.
Co.

v.

United

States,

368

F.3d

385,

406

(4th

See Pittston
Cir.

2004)

(affirming decision to seal certain “confidential, proprietary,
commercial,

or

financial

data”

that

was

produced

under

a

protective order).

n.1). Lennar is silent as to whether to seal the reply or any
exhibits attached thereto. Therefore, Lennar will have fourteen
(14) days to move to seal these documents.
If Lennar decides
not to file such a motion within fourteen (14) days, the
documents will be unsealed at that time.
13

IV.

Conclusion
For

the

foregoing

reasons,

iStar’s

objection

to

Judge

Connelly’s April 11, 2013 order will be sustained and the order
will

be

vacated

and

remanded

to

provide

Judge

Connelly

an

opportunity to clarify his decision regarding the imposition of
sanctions
caused
consider

and

by

related

Lennar’s

the

request

costs,

violation
for

expenses,
of

facts

to

and

discovery
be

attorneys’
orders,

deemed

and

admitted.

separate Order will follow.

/s/
DEBORAH K. CHASANOW
United States District Judge

14

fees
to
A