Avitus, Inc v. NEA Delivery, LLC et al
Filing
72
ORDER DENYING 47 Motion to Deem Facts Admitted, For Sanctions, For Dismissal of Counterclaims and for Entry of Default Judgment or for Summary Judgment; DENYING 58 Motion to Enforce Settlement; DENYING 62 Motion to Enforce Settlement. NEA shall respond to Avituss First Discovery Requests within thirty (30) days of the date of this Order. (See Order for specifics.) Signed by Magistrate Judge Timothy J. Cavan on 9/10/2018. (JDR)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BILLINGS DIVISION
CV 17-69-BLG-TJC
AVITUS, INC.,
Plaintiff/Counter-Defendant,
vs.
ORDER
NEA DELIVERY, LLC and
NICHOLAS BULCAO, individually,
Defendants/Counter-Claimants,
_______________________________
AVITUS, INC.,
Third-Party Plaintiff,
vs.
AMERICAN ZURICH INSURANCE
COMPANY,
Third-Party Defendant.
Before the Court are two motions filed by plaintiff/counter-defendant/thirdparty plaintiff Avitus, Inc. (“Avitus”): (1) Motion to Deem Facts Admitted, for
Sanctions, for Dismissal of Counterclaims, and for Entry of Default Judgment or
for Summary Judgment (Doc. 47) (the “Sanctions Motion”); and (2) Motion to
Enforce Settlement Agreement (Doc. 58) (the “Settlement Motion”).
1
Defendants/counter-claimants NEA Delivery, LLC (“NEA”) and Nicholas Bulcao
(“Bulcao”), (collectively, “Defendants”) oppose both motions. Third-party
defendant American Zurich Insurance Company (“Zurich”) has joined in the
Settlement Motion, but has not expressed a position as to the Sanctions Motion.
(See Doc. 62.) For the reasons that follow, the Sanctions Motion and the
Settlement Motions are DENIED.
I.
Pertinent Facts
The following facts are taken from the parties’ briefing and other pleadings
contained in the case docket, and are assumed to be true for the purposes of ruling
on the instant Motions. The facts are undisputed unless otherwise noted.
A.
Background
In October 2014, NEA and Avitus entered into a Professional Employment
Agreement (the “PEA”), “whereby Avitus would provide various services to NEA,
including payroll processing, as well as insurance coverage under a Worker’s
Compensation Insurance policy and an EPLI policy.” (Doc. 59 at 2-3.) Bulcao
personally guaranteed NEA’s performance of the terms and conditions of the PEA.
(Id. at 3; see also Doc. 34 at ¶ 3.)
In April 2017, Avitus filed suit against Defendants in Montana state court
alleging that NEA had failed to pay for services Avitus provided pursuant to the
PEA. (Doc. 5.) Defendants timely removed Avitus’s suit to this Court, and
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counterclaimed against Avitus for claims also related to the PEA. (Docs. 1, 2.)
The Court will discuss below the precise nature of each party’s claims as
necessary.
On August 22, 2017, Defendants filed a Motion for a Mandatory Preliminary
Injunction, claiming NEA inadvertently wired roughly $350,000.00 to Avitus.
NEA alleged that despite its prompt notice to Avitus that the transfer was
inadvertent, Avitus inappropriately retained $172,524.26 of the transfer. (See
Docs. 21, 22.) Avitus responded that it was entitled to that sum, due to the very
claims that form the basis of this lawsuit. (Doc. 25.)
B.
Facts Relating Primarily to the Sanctions Motion
On September 22, 2017, Avitus sent its First Discovery Requests to
NEA Delivery, LLC (Doc. 49-1.)
The discovery requests contain nine
requests for admission (the “RFAs”) that directly reach the merits of the
parties’ claims. (Id. at 3-5.) For example, NEA was asked to admit “that as
of August 2, 2017, NEA owed Avitus $172,524.26,” representing the amount
Avitus retained from the inadvertent wire transfer. (Id. at 3.) NEA was also
asked to admit that “Avitus’s alleged breaches of the PEA are (1) unproven
and (2) unliquidated.” (Id. at 4.) It is undisputed that NEA did not timely
respond to Avitus’s discovery requests, including to the RFAs.
3
On October 25, 2017, Defendants’ counsel filed a Motion to Withdraw as
Counsel of Record. (Doc. 37.) Counsel represented in the motion that Avitus had
agreed to allow Defendants an additional 30 days to respond to Plaintiff’s first
combined set of discovery requests. (Doc. 37 at 2.) Defendants’ responses were
therefore due on or about November 22, 2017. Id. After first denying their motion
on procedural grounds, the Court granted their Amended Motion to Withdraw as
Counsel of Record on December 18, 2017. (Doc. 41.)
As discussed more fully below, counsel for Avitus was then contacted on
January 23, 2018 by a California attorney who had been retained to represent
Defendants to discuss settlement of this case. Settlement discussions ensued
between January 23 and February 22, 2018. (Doc. 67-1 at 12.) At that time,
settlement efforts broke down, and Avitus’s counsel was advised that Defendants
intended to secure counsel to represent them in this action.
In the meantime, Avitus filed the Sanctions Motion on February 2, 2018.
(Doc. 47.) Defendants failed to respond to the motion in the time set forth in D.
Mont. L.R. 7.1(d)(1)(B). Therefore, on March 2, 2018, the Court addressed both
Defendants’ failure to respond to the Sanctions Motion and their lack of counsel
since withdrawal, ordering as follows:
(1) on or before March 16[,] 2018, NEA shall either (a) retain
new counsel and such counsel shall enter a notice of appearance on its
behalf, or (b) show cause, if any, why it is unable to retain counsel;
4
(2) on or before March 16, 2018, Bulcao shall either (a) retain
new counsel and such counsel shall enter a notice of appearance on his
behalf, (b) show cause, if any, why he is unable to retain counsel, or (c)
file a notice with the Court of his intent to proceed pro se; and
(3) on or before March 16, 2018, Defendants shall show
cause, if any, why the Court should not deem Avitus’s Motion to be
well-taken in accordance with L.R. 7.1(d)(1)(B)(ii).
(Doc. 54.)
Defendants’ present counsel entered a notice of appearance on March 15,
2018. (Doc. 55.) After a series of time-extensions, Defendants responded to the
Sanctions Motion on April 11, 2018. (Doc. 68.) In conjunction with their
response to the Sanctions Motion, Defendants submitted an Affidavit of Nicholas
Bulcao. (Doc. 68-1.) In his affidavit, Bulcao admits NEA did not respond to the
discovery requests “in a timely fashion.” (Id. at ¶ 2.) He stated the discovery was
extensive, and “we do not and did not have the resources to answer.” (Id. at ¶ 4.)
Bulcao explained that NEA “anticipated settlement and transferred the few
resources we had to not focus on the discovery requests.” (Id. at ¶ 7.) Bulcao also
stated that the Defendants do not have access to some of the information requested.
(Id. at ¶ 5.) Defendants do not make any representation that they have responded
to Avitus’s RFAs, or to its other discovery requests.
C.
Facts Relating Primarily to the Settlement Motion
Concurrent to this litigation, NEA is defending three actions in California.
(Docs. 59 at 3, 59-3.) Avitus represents that it “is a named co-defendant in some,
5
but not all of those California actions.” Id. NEA and Avitus have competing
indemnification claims in each case. (Id. at 3-4.)
As noted above, counsel for Avitus, T. Thomas Singer, was contacted on
January 23, 2018, by Richard Mooney, who purportedly represented to Singer that
he is a California attorney who had been engaged to represent Defendants. (Doc.
59 at 3.) Avitus claims – and Mooney confirms – that the purpose of the January
23 phone call was to discuss settlement of the case. (Id.; see also Doc. 67-1 at 4.)
On January 26, 2018, Mooney sent a letter to Singer thanking him for
“taking the time to update me on and discuss the potential resolution of the Avitus
v. NEA Delivery litigation.” (Doc. 67-1 at 9.) A series of letters and emails
followed, discussing various settlement proposals. Most pertinent are the
following excerpts:
• On February 7, 2018, Mooney sent an email to Singer indicating “I have
spoken with my client and been authorized to propose that the parties
settle the dispute on a walk away basis.” (Doc. 67-1 at 11.)
• On February 8, 2018, Singer responded, “[i]f NEA and Mr. Bulcao are
proposing a mutual release of all claims, including Avitus’s claim for
attorneys’ fees and any claims where NEA is seeking or could seek
contribution or indemnity, and any other claims arising from or relating
to the co-employment relationship that formerly existed between NEA
and Avitus, then Avitus will accept the proposal.” (Id.)
• On February 8, 2018, Mooney responded, “[t]hat is indeed our
proposal, and I am pleased your client will agree.” (Doc. 59-2.)
• On February 15, 2018, following receipt on February 12, 2018, of
Singer’s propose release and proposed stipulation to dismiss, Mooney
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wrote that the release and stipulation “[b]asically seems fine to
me…with the possible exception of the material re N & E / California
actions, about which I was not aware.” (Doc. 67-1 at 13.)
• On February, 20, 2018, Singer asked, “[a]re we going to get this
wrapped up?” (Id.)
• On February 20, 2018, Mooney told Singer that Defendants “will not
waive their rights with respect to [the California] actions.” Mooney
stated to Singer, “[y]ou and I were only discussing the Montana action,
and indeed I had no knowledge of or involvement with the California
actions.” (Id. at 12.)
• On February 20, 2018, Singer responded that he assumed Mooney
knew about the California actions because he (Mooney) practices in
California, and Mooney’s clients knew about the actions at any rate.
Singer explained that he would move the Court to enforce settlement if
Defendants did not agree to settle all of the cases on a walk-away basis.
(Id.)
• On February 22, 2018, Mooney sent Singer a letter, reading in pertinent
part, “[f]or at least two weeks, you and I discussed…the merits of the
parties’ positions in the Montana litigation…. At no time was there any
discussion of the multi-million dollar dispute in California. The
agreement we were negotiating involved only the Montana action.” (Id.
at 14.)
Avitus filed the Settlement Motion on March 23, 2018, arguing that these
communications between Singer and Mooney constitute a binding agreement to
settle the instant Montana litigation and the three California cases. (Doc. 62.)
II.
Discussion
A.
Sanctions Motions
In its Sanctions Motion, Avitus requests several potential avenues to remedy
what it believes to be sanctionable conduct by Defendants. (See generally Doc.
7
48.) The Court will discuss each of these below in the order it finds most
appropriate.
1.
Fed. R. Civ. P. 36
Avitus asserts that its RFAs to NEA should be deemed admitted. Fed. R.
Civ. P. 36(a)(3) states that a RFA is admitted “unless, within 30 days after service
of the request…the party to whom the request is directed serves upon the party
requesting the admission a written answer or objection addressed to the matter,
signed by the party or by the party’s attorney.”
Once a RFA is admitted, the matter “is conclusively established unless the
court on motion permits withdrawal or amendment of the admission” pursuant to
Fed. R. Civ. P. 36(b). Rule 36(b) provides in full:
A matter admitted under this rule is conclusively established unless the
court, on motion, permits the admission to be withdrawn or amended.
Subject to Rule 16(e), the court may permit withdrawal or amendment
if it would promote the presentation of the merits of the action and if
the court is not persuaded that it would prejudice the requesting party
in maintaining or defending the action on the merits. An admission
under this rule is not an admission for any other purpose and cannot be
used against the party in any other proceeding.
There is no dispute that NEA failed to respond to Avitus’s RFAs within the
30-day period contemplated by Rule 36(a). (See Docs. 68 at 2 (“…Defendants
admit that thirty days have passed after being served the requests for admission.”),
68-1 at ¶ 2.) Notwithstanding that admission, Defendants argue that “the Court has
8
not deemed any facts admitted,” and urge that Avitus’s “request to have facts
deemed admitted should be denied because the two prongs of the Rule 36(b) test
can be met.” (Doc. 68 at 2.)
Defendants misunderstand the operation of Rule 36(a). Once NEA failed to
respond to Avitus’s RFAs within the time prescribed by Rule 36(a), “the facts
were…admitted without the need for any further action by the court or the parties.”
Layton v. International Association of Machinists and Aerospace Workers, 285
Fed.Appx. 340, 341 (9th Cir. 2008) (citing F.T.C. v. Medicor LLC, 217 F.Supp.2d
1048, 1053 (C.D. Cal. 2002) (“No motion to establish the admissions is needed
because [Rule 36(a)] is self-executing.”)). Accordingly, the question before the
Court is not whether to deem the RFAs admitted in the first instance, but whether
Rule 36(b) should operate to relieve NEA of those admissions.
Rule 36(b) is permissive, not mandatory, with respect to the withdrawal of
admissions. See Asea, Inc. v. S. Pac. Transp. Co., 669 F.2d 1242, 1248 (9th Cir.
1981). The rule permits a district court to exercise its discretion to grant relief
from an admission made under Rule 36(a) only when “(1) presentation of the
merits of the action must be subserved, and (2) the party who obtained the
admission must not be prejudiced by the withdrawal.” Hadley v. United States, 45
F.3d 1345, 1348 (9th Cir. 1995).
9
The first prong is “satisfied when upholding the admissions would
practically eliminate any presentation of the merits of the case.” Id. As to the
second prong, “[t]he prejudice contemplated by Rule 36(b) is ‘not simply that the
party who obtained the admission will now have to convince the factfinder of its
truth. Rather, it relates to the difficulty a party may face in proving its case, e.g.
caused by the unavailability of key witnesses, because of the sudden need to obtain
evidence’ with respect to the questions previously deemed admitted.” Id. (quoting
Brook Vill. n. Assocs. v. Gen. Elec. Co., 686 F.2d 66, 70 (1st Cir. 1982). The party
seeking to enforce the admission has the burden to establish prejudice under the
second prong. Id.
Additionally, in deciding a motion to withdraw an admission under Rule
36(b), a court must consider the core purpose of the rule. Conton v. U.S., 474 F.3d
616, 622 (9th Cir. 2007). That is, “the rule seeks to serve two important goals:
truth seeking in litigation and efficiency in dispensing justice.” Id.
Applying the requirements of Rule 36(b), and being mindful of the
fundamental purpose of the rule, the Court finds that Defendants should be
permitted to withdraw their admissions to Avitus’s RFAs. As to the first prong of
the analysis, there is little question that upholding the admissions would practically
elimination a determination of the merits. Defendants submit “[t]he nine facts
[Avitus] seeks to be deemed admitted will essentially destroy any dispute
10
Defendants have,” and that “[t]he nine facts are in dispute because they essentially
make Plaintiff’s case true.” (Doc. 68 at 3.) Avitus does not dispute this. In fact, it
has moved for summary judgment as to all of its claims, and all of Defendants’
counterclaims, based solely upon the nine RFAs. (Doc. 49.)
Avitus has also not carried its burden with respect to the second prong. It
does not maintain, for example, to have relied upon any of the admissions to their
detriment, or that they do not have the opportunity to address any of the issues
previously deemed admitted. Nor have they shown that the failure to timely
respond to the RFAs, or their deemed admission, caused the unavailability of any
witness or loss of any evidence.1 No trial date is currently set in this matter, and
the Court will address any prejudice to Avitus by giving it the full opportunity to
conduct discovery on the issues covered by its RFAs.
Avitus also argues it would be improper to relieve Defendants of their
admissions because Rule 36(b) provides that the Court may only permit an
admission to be withdrawn “on motion.” Since Defendants have not filed a Rule
36(b) motion, Avitus argues, the Court cannot apply the rule to relieve them of the
consequences of failing to respond to the RFAs.
1
NEA has indicated it does not have access to certain information requested in
discovery. (Doc. 68-1 at ¶ 5.) But the nature and significance of this information
is not apparent, and there has been no showing the information would have been
available had NEA timely responded to the RFAs.
11
While Avitus is correct that Rule 36(b) contemplates a motion to withdraw
or amend an admission, several decisions have found that a formal motion is not
required when a party otherwise seeks to be relieved of an admission. The Eighth
Circuit, for example, has interpreted the motion requirement under Rule 36(b)
“generously . . . to encompass court filings that were not formal motions.”
Quasius v. Schwan Food Co., 596 F.3d 947, 951 (8th Cir. 2010). The Ninth
Circuit has also stated that its precedent “does not require that a request for relief
under Rule 36(b) be brought in a separate motion.” Friedman v. Live Nation
Merch., Inc., 833 F.3d 1180, 1185 (9th Cir. 2016). See also, Whitsitt v. Club
Resource Group, 357 Fed. Appx. 877, 878 (9th Cir. 2009) (district court did not
abuse its discretion by construing opposition to motion for summary judgment as a
motion to withdraw admissions under Rule 36); Elements of Behavioral Health,
inc. v. Marcus, 2017 WL 5634854 *4 (C.D. Cal. September 6, 2017) (response to
summary judgment can be construed as a request to amend admissions under Rule
36(b).
Here, while the Defendants’ response to Avitus’s Sanctions Motion was not
styled as motion for relief under Rule 36(b), such a request is clearly the import of
their response. Defendants request that the RFAs not be admitted, and they
specifically address Rule 36(b) and the Ninth Circuit decisions outlining the
requirements for relief under the rule. (Doc. 68 at 2-4.) To deny Defendants relief
12
based upon their failure to properly designate their pleading would be an overlytechnical application of Rule 36(b), and would clearly contravene the truth-seeking
purpose of Rule 36.
Avitus does, however, raise an issue of concern in its discussion of this
issue. That is, NEA has not indicated it is now prepared to fully respond to
Avitus’s discovery requests and participate in discovery. In fact, Bulcao’s affidavit
indicates NEA does not have the resources to do so. Lack of resources is not
proper grounds for failing to respond to appropriate discovery requests. If a party
concludes that discovery requests impose an undue burden or expense under the
rules, it is permitted to move for a protective order under Fed. R. Civ. P. 26(c). If a
party does not have access to certain information requested, it must respond and
explain that it does not have the information and why it cannot gain access to the
information. But not responding is not an option. NEA must fully participate and
cooperate in the discovery process. To that end, and to ensure no further prejudice
to Avitus, NEA must provide full and complete responses to Avitus’s First
Discovery Requests to NEA Delivery, LLC within 30 days from the date of this
order.
///
///
///
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2.
Fed. R. Civ. P. 41(b)
Avitus contends that NEA’s counterclaims should be dismissed for failure to
prosecute under Fed. R. Civ. P. 41(b) and L.R. 83.8(b). Fed. R. Civ. P. 41(b)
authorizes the Court to dismiss an action “[i]f the plaintiff fails to prosecute or to
comply with [the Federal Rules of Civil Procedure] or a court order[.]” Avitus
argues that dismissal under Rule 41(b) is proper here because Defendants have
failed to comply with multiple court orders, have failed to participate meaningfully
in discovery, and generally have failed to prosecute their case. (Doc. 48 at 7-10.)
In considering dismissal under Rule 41(b), a court must weigh five factors:
“(1) the public’s interest in expeditious resolution of litigation; (2) the court’s need
to manage its docket; (3) the risk of prejudice to the defendants; (4) the availability
of less drastic alternatives; and (5) the public policy favoring disposition of cases
on their merits.” Pagtalunan v. Galaza, 291 F.3d 639, 642 (9th Cir. 2002), cert.
denied, (2003) (citing Ferdik v. Bonzelet, 963 F.2d 1258, 1260-61 (9th Cir. 1992)).
a.
Expeditious Resolution
“The public’s interest in expeditious resolution of litigation always favors
dismissal.” Yourish v. California Amplifier, 191 F.3d 983, 990 (9th Cir. 1990).
While Avitus overstates the degree to which Defendants have failed to comply
with this Court’s orders, it is true that Defendants have failed to comply with
certain directions of the Court, and have failed to respond to Avitus’s discovery
14
requests. In addition, their dilatory conduct has resulted in a delay in the
prosecution and resolution of this action. Therefore, this factor weighs in favor of
dismissal.
b.
Docket Management
“The trial judge is in the best position to determine whether the delay in a
particular case interferes with docket management and the public interest.”
Pagtalunan, 291 F.3d at 642 (citing Yourish, 191 F.3d at 990). As noted by the
Ninth Circuit, “[i]t is incumbent upon us to preserve the district courts’ power to
manage their docket without being subject to the endless vexatious noncompliance
of litigants . . . .” Ferdik, 963 F.2d at 1261.
Litigants who do not prosecute their cases, and do not obey the Court’s
orders, disrupt the Court’s handling of other matters by consuming time and
resources needed by litigants who responsibly manage their cases. The Court
cannot manage its docket if a party ignores Court orders.
Nevertheless, the Court recognizes that Defendants were unrepresented for a
significant portion of the delay which may be attributable to Defendants’
untimeliness. While that certainly does not relieve them of their obligations to the
Court and opposing parties, Defendants are now represented. The Court is
confident their current counsel will adhere to the Court’s orders and deadlines
going forward. The Court therefore finds this factor weighs against dismissal.
15
c.
Prejudice to Defendants
“To prove prejudice, a defendant must establish that plaintiff’s actions
impaired defendant’s ability to proceed to trial or threatened to interfere with the
rightful decision of the case.” Pagtalunan, 291 F.3d at 642 (citing Malone v.
United States Postal Serv., 833 F.2d 128, 131 (9th Cir. 1987)). “Limited delays
and the prejudice to a defendant from the pendency of a lawsuit are realities of the
system that have to be accepted, provided the prejudice is not compounded by
‘unreasonable’ delays.” Id. But “[t]he law…presumes prejudice from
unreasonable delay.” In re Phenylpropanolamine (PPA) Products Liability
Litigation, 460 F.3d at 1227. “Unnecessary delay inherently increases the risk that
witnesses’ memories will fade and evidence will become stale.” Pagtalunan, 291
F.3d at 642 (citing Sibron v. New York, 392 U.S. 40, 57 (1968)). Nevertheless, the
presumption may be rebutted if there is a showing that no actual prejudice
occurred. In re Phenylpropanolamine (PPA) Products Liability Litigation, 460
F.3d at 1228.
While the Defendants can reasonably be charged with a delay of at least
three months between the withdrawal of their counsel on December 18, 2017, and
the appearance of new counsel on March 15, 2018, there has been no showing that
their actions caused actual prejudice, or will interfere with Avitus’s ability to
16
obtain a fair trial and the rightful decision of the case. Therefore, this factor
weighs against dismissal.
d.
Alternatives
“‘The district court abuses its discretion if it imposes a sanction of dismissal
without first considering the impact of the sanction and the adequacy of less drastic
sanctions.’” Malone v. U.S. Postal Serv., 833 F.2d 128, 131–32 (quoting United
States v. Nat'l Med. Enters., Inc., 792 F.2d 906, 912 (9th Cir.1986)). In this case,
Defendants have now secured counsel to represent them in this action. As noted
above, as an alternative to dismissal or other sanctions, Defendants will be ordered
to respond to Avitus’s discovery requests within 30 days, and the Court will
provide Avitus with the additional time it requires to conduct necessary discovery.
This alternative is sufficient to address any prejudice caused by the Defendants’
delay. Therefore, this factor weighs against dismissal.
e.
Disposition on the Merits
Finally, public policy favors the disposition of cases on their merits.
Pagtalunan, 291 F.3d at 643 (citing Hernandez v. City of El Monte, 138 F.3d 393,
399 (9th Cir. 1998)). However, the Ninth Circuit “[has] also recognized that this
factor lends little support to a party whose responsibility it is to move a case
toward disposition on the merits but whose conduct impedes progress in that
direction.” In re PPA, 460 F.3d at 1228. Given that Defendants are now
17
represented by counsel and are in a position to move their counterclaims forward,
this factor weighs against dismissal at this time.
f.
Conclusion
On balance, consideration of relevant factors leads to the conclusion that
dismissal is inappropriate. Avitus’s motion for Rule 41(b) dismissal is therefore
DENIED.
3.
Fed. R. Civ. P. 16(f) and 37(c)
Avitus moves for sanctions under Fed. R. Civ. P. 16(f) and 37(c), again
citing Defendants’ failure to comply with this Court’s orders and failing to respond
to discovery. Rule 16(f) provides: “[o]n motion or on its own, the court may issue
any just orders, including those authorized by Rule 37(b)(2)(A)(ii)-(vii), if a party
or its attorney: (A) fails to appear at a scheduling or other pretrial conference; (B)
is substantially unprepared to participate – or does not participate in good faith – in
the conference; or (C) fails to obey a scheduling or other pretrial order.” Under
Rule 37(c), “[i]f a party fails to provide information or identify a witness as
required by Rule 26(a) or (e), the party is not allowed to use that information or
witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure
was substantially justified or is harmless.” Fed. R. Civ. P. 37(c)
For the same reasons discussed above, the Court declines to sanction
Defendants under these Rules. But the Court has made Defendants aware of its
18
expectations moving forward, and it may readdress sanctions under these and other
rules if Defendants do not fully comply with the Court’s orders or their discovery
obligations. At this time, however, Avitus’s Rule 16(f) and 37(c) motions are
DENIED.
4.
Fed. R. Civ. P. 56
As part of its Sanctions Motion, Avitus has requested the entry of summary
judgment in its favor, apparently as to all claims asserted in its Amended
Complaint and all counterclaims brought by Defendants.
Summary judgment is appropriate where the moving party demonstrates the
absence of a genuine issue of material fact and entitlement to judgment as a matter
of law. See Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986). The party seeking summary judgment always bears the initial burden of
establishing the absence of a genuine issue of material fact. Celotex, 477 U.S. at
323. The moving party can satisfy this burden in two ways: (1) by presenting
evidence that negates an essential element of the nonmoving party’s case; or (2) by
demonstrating that the nonmoving party failed to make a showing sufficient to
establish an element essential to that party’s case on which that party will bear the
burden of proof at trial. Id. at 322-23.
Avitus’s summary judgment motion is based entirely upon NEA’s deemed
admissions to its RFAs. As determined above, however, NEA has been permitted
19
to withdraw those admissions. Therefore, the entire factual bases for Avitus’s
motion has been vacated, and its motion for summary judgment must be DENIED.
5.
Fed. R. Civ. P. 55
Avitus has also moved for default judgment “on all remaining claims
against NEA.” (Doc. 48 at 10.) This motion is based on the same violations of the
Court’s orders and failure to respond to discovery.
While a district court has discretion to impose the sanction of default, it is a
harsh penalty imposed in only extreme circumstances. Dreith v. Nu Image, Inc.,
648 F.3d 779, 788 (9th Cir. 2011). As the Seventh Circuit has recognized,
“[d]efault judgment is strong medicine for discovery abuse. It is appropriate only
where there is a clear record of delay or contumacious conduct, where other less
drastic sanctions have proven unavailing, or where a party displays willfulness, bad
faith, or fault.” Domanus v. Lewicki, 742 F.3d 290, 301 (7th Cir. 2014) (internal
quotations and citations omitted.) In determining whether the sanction is
appropriate, a district court must evaluate the same five factors outlined above for
dismissal under Rule 41(b). Dreith, 648 F.3d at 788.
For the reasons explained above with respect to Rule 41(b), dismissal is not
appropriate in this case. While Defendants’ conduct has been dilatory, it does not
warrant such an extreme measure. Defendants are now represented by counsel;
they have been ordered to respond fully to discovery within 30 days; and Avitus
20
will be provided the opportunity to conduct any discovery necessary to address the
issues in the case and prepare for trial.
This case should be determined on the merits, not through sanctions and
default. Avitus’s Rule 55 motion is therefore DENIED.
B.
Settlement Motion
Avitus has also filed a separate motion to enforce an alleged settlement
between the parties. “Settlement agreements are contracts, subject to the
provisions of contract law.” Kluver v. PPL Montana, LLC, 293 P.3d 817, 824
(Mont. 2012). A contract must contain all its essential terms in order to be
binding. Id. A contract requires (1) identifiable parties capable of contracting; (2)
their consent; (3) a lawful object; and (4) a sufficient cause or consideration. Id.
“The consent of the parties requires that there be a ‘mutual assent or a meeting of
the minds on all essential terms to form a binding contract.’” Global Client
Solutions, LLC v. Ossello, 367 P.3d 361, 367 (Mont. 2016) (quoting Keesun
Partners v. Ferdig Oil Co., 816 P.2d 417, 421 (1991).
Avitus argues that the email exchange excerpted above between Singer and
Mooney contains all the essential elements of a contract. Therefore, it contends the
Court should enforce the agreement in the manner Avitus insists: that is, a mutual
walk-away in this case and in the three extra-jurisdictional California cases. (See
generally Doc. 59.) Defendants argue they never consented to settle the California
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cases, and therefore an essential element of a contract is missing. (See generally
Doc. 67.)
“It is well settled that a district court has the equitable power to enforce
summarily an agreement to settle a case pending before it,” Anand v. Cal. Dept. of
Developmental Services, 626 F.Supp.2d 1061, 1064 (E.D. Cal. 2009).
Nevertheless, Avitus has not explained, much less established, this Court’s power
to enforce a settlement agreement that would terminate cases currently pending in
other jurisdictions. See e.g., States v. Orr Const. Co., 560 F.2d 765, 769 (7th Cir.
1977) (“the court’s jurisdiction to enforce a settlement agreement must derive from
its original jurisdiction over the complaint”). Regardless, the Court agrees with
Defendants that the exchange between Singer and Mooney did not create a binding
settlement agreement.
As Mooney explains in his affidavit – and as the available documentary
evidence confirms – none of the communications between Mooney and Singer,
whether written or telephonic, contained any mention of the California cases until
Avitus’s February 12, 2017 proposed settlement agreement. That proposal was
rejected. (Doc. 67-1 at ¶ 14.) Avitus does not dispute that Mooney and Singer
never discussed the California cases; rather, Avitus relies on language from
Singer’s February 8, 2018, email to Mooney purporting to settle “any claims where
NEA is seeking or could seek contribution or indemnity, and any other claims
22
arising from or relating to the co-employment relationship that formerly existed
between NEA and Avitus.” (Doc. 59-2). According to Avitus, the quoted
language – which does not mention the California cases or any extra-jurisdictional
dispute – unambiguously includes not only claims arising from the allegations in
the instant lawsuit, but also “contribution or indemnity claims, whether asserted or
unasserted by NEA or by Avitus, in existing actions, actions that do not exist, and
actions that neither party is aware of…without respect to jurisdiction.” (Doc. 59 at
9.) This argument is devoid of merit.
Mooney’s January 26, 2018 letter to Singer begins by thanking Singer for
“discuss[ing] the potential resolution of the Avitus v. NEA Delivery litigation.”
(Doc. 67-1 at 9.) Regardless of Avitus’s and NEA’s respective involvements in the
California cases, none of those cases are captioned “Avitus v. NEA Delivery”; only
this case.2 None of Mooney’s or Singer’s later correspondences evince any
contemplation of the settlement of disputes other than this case. It is clear to the
Court that Mooney understood – and only had cause to believe – that he was
discussing settlement of the instant lawsuit. If Singer meant for those settlement
discussions to include the California cases, he should have expressed that intention
more forthrightly than he did.
2
The Court also notes the use of the definite article “the,” and singular “litigation.”
23
Mooney has attested by sworn affidavit that he and Singer never discussed
the California cases; Mooney was not involved in the California cases; he had no
authority to settle the California cases; and indeed, he was unaware of them prior
to receipt of Avitus’s proposed settlement agreement. Avitus offers no evidence to
discredit any of these assertions. Accordingly, the Court finds that there was not a
“meeting of the minds” as to the involvement of the California cases in the
settlement agreement, and that the purported agreement to settle therefore lacked
the essential element of consent. Ossello, 367 P.3d at 367.
The Court similarly rejects Zurich’s argument that Avitus and Defendants
settled this case regardless of the applicability of the agreement to the California
cases. (See Doc. 71 at 13.) As explained, the Court finds that the purported
agreement did not contain all of the essential terms of a contract, and therefore no
contract was ever formed from which the Court could sever and enforce certain
terms to the exclusion of others.
For the foregoing reasons, the Settlement Motion is DENIED.
IV.
Conclusion
The Court hereby ORDERS as follows:
(1)
Avitus’s Motion to Deem Facts Admitted, For Sanctions, For
Dismissal of Counterclaims, And For Entry of Default Judgment Or
For Summary Judgment (Doc. 47) is DENIED;
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(2)
Avitus’s Motion To Enforce Settlement Agreement (Doc. 58) is
DENIED;
(3)
Zurich’s Motion to Enforce Settlement Agreement (Doc. 62) is
DENIED;
(4)
NEA shall respond to Avitus’s First Discovery Requests within thirty
(30) days of the date of this Order. Defendants are advised that any future failure
to fully comply with the Court’s orders or its discovery obligations may be met
with sanctions. Depending on the nature of the violation, this may include the
entry of judgment in favor of Avitus on its claims, and the dismissal of the
Defendants’ counterclaims.
DATED this 10th day of September, 2018.
_______________________________
TIMOTHY J. CAVAN
United States Magistrate Judge
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