Peter Kiewit Sons', Inc. v. Wall Street Equity Group, Inc. et al

Filing 384

MEMORANDUM AND ORDER - West's objection to the Magistrate Judge's findings andrecommendation, styled as a "Motion in Opposition to Findings and Recommendations" (filing 377), is overruled. Friedman's "Objection to Find ings and Recommendation of Default Dated 4/8/13" (filing 379 ) is overruled. The Magistrate Judge's Findings and Recommendation (filing 376 ) are adopted. The defendants' operative answer (filing 133 ) is stricken. Default is ent ered against all defendants as a discovery sanction. The Clerk of the Court is directed to enter the defendants' default pursuant to Fed. R. Civ. P. 55(a). A default judgment shall be entered upon the plaintiff's Second Motion for Sanc tions (filing 351) pursuant to Fed. R. Civ. P. 55(b)(2) and NECivR 55.1(c). The plaintiff shall be afforded an opportunity to prove not only the amount of damages at issue, but the degree and extent of each defendant's culpability in causing t hose damages. The United States Magistrate Judge is directed to progress this case to a final resolution. The Clerk of the Court is directed to mail and email a copyof this filing to each of the defendants. Ordered by Judge John M. Gerrard. (Copies mailed as directed)(AOA)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
PETER KIEWIT SONS', INC.,
Plaintiff,

8:10-CV-365

vs.
MEMORANDUM AND ORDER
WALL STREET EQUITY GROUP,
INC., et al.,
Defendants.
This matter is before the Court on the Findings and Recommendation
of the United States Magistrate Judge (filing 376) recommending that default
be entered against all the defendants as a sanction for severe and continuing
discovery abuses. Because default has already been entered against
defendants Wall Street Equity Group, Inc. and Wall Street Group of
Companies, Inc. (filing 375), the present findings and recommendation are
primarily directed at the remaining defendants, Shepherd Friedman and
Steven West. Objections to the findings and recommendation have been filed
by both Friedman (filing 379) and West (filing 377). But the Court will
overrule those objections and adopt the Magistrate Judge's findings and
recommendation.
The defendants' discovery abuses are well documented in the
Magistrate Judge's findings and recommendation, and in the previous orders
entered by the Magistrate Judge, so they need not be repeated here. It
suffices to say that the Court has reviewed the Magistrate Judge's findings de
novo and finds them to be well supported by the record. See, 28 U.S.C. §
636(b)(1); Fed. R. Civ. P. 72(b)(3).
West's objection primarily consists of a point-by-point denial of the
Magistrate Judge's factual findings. Filing 377 at 1-2. The Magistrate Judge
has previously addressed why West's claims are not credible, see filing 263 at
28-36, and the Court agrees with those findings. West also complains that his
previous counsel was ineffective, and accuses her (in effect) of breaching her
fiduciary duties toward him. Filing 377 at 2-3. But it is well understood that
litigants choose counsel at their peril. Inman v. Am. Home Furniture
Placement, Inc., 120 F.3d 117, 118 (8th Cir. 1997); Comiskey v. JFTJ Corp.,
989 F.2d 1007, 1010 (8th Cir. 1993). And it is equally well established that a
party is responsible for the actions and conduct of his or her counsel and that

dismissal or default may be entered against a party as a result of counsel's
actions.1 Comiskey, 989 F.2d at 1010; see also, Everyday Learning Corp. v.
Larson, 242 F.3d 815, 817 (8th Cir. 2001); Rodgers v. Curators of the Univ. of
Mo., 135 F.3d 1216, 1220 (8th Cir. 1998). West
voluntarily chose this attorney as his representative in the
action, and he cannot now avoid the consequences of the acts or
omissions of this freely selected agent. Any other notion would be
wholly inconsistent with our system of representative litigation,
in which each party is deemed bound by the acts of his lawyeragent and is considered to have notice of all facts, notice of which
can be charged upon the attorney.
Link v. Wabash R.R., 370 U.S. 626, 633-34 (1962) (quotations omitted);
accord Wescott Agri-Products, Inc. v. Sterling State Bank, Inc., 682 F.3d 1091,
1096 (8th Cir. 2012). If West is truly an innocent party who has been misled
and victimized by his attorney (however unlikely that might seem), then he
has recourse in a malpractice action. See, Link, 370 U.S. at 634 n.10; Inman,
120 F.3d at 119.
Friedman's objection covers much of the same territory: he generally
complains that he left the defendant companies in July 2011, and cannot be
held responsible for anything that happened after that; and what's more, if
anything happened before then, he had nothing to do with it. Filing 379 at 14. Friedman stands on somewhat firmer ground than West—Friedman, at
least, does not seem to be implicated in the destruction of evidence to the
extent that West is.2 See filing 263. But like West, he is responsible for the
conduct of litigation that was undertaken by his chosen attorney in his
defense. His denials, even if credible (and the Court is not saying that they
are) do not preclude sanctioning him for the conduct undertaken in his name.
It is not unjust to hold a client responsible for his attorney's misconduct.
Wescott Agri-Products, 682 F.3d at 1096.

And of course, as explained by the Magistrate Judge, West's own sanctionable conduct is
clearly at issue. See, e.g., filing 263 at 28-36.
1

That having been said, Friedman did endorse, under oath, the facts asserted by the
defendants in support of their motion for summary judgment. See filing 242 at 9-24; filing
242-3. Among those facts were assertions of innocence with regard to the conduct of
discovery, and facts that in his objection Friedman claims to know nothing about. Compare
filing 242 at 9-24; filing 379. In other words, if the professions of ignorance in his objection
are true, then Friedman almost certainly would have perjured himself in support of the
defendants' motion for summary judgment.
2

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Friedman also points out, correctly, that a judgment of default is a
severe punishment. Filing 379 at 1. But Fed. R. Civ. P. 37(b)(2)(A)(vi) grants
the Court authority to enter a default judgment against a party who abuses
the discovery process. Chrysler Corp. v. Carey, 186 F.3d 1016, 1022 (8th Cir.
1999) (quoting Comiskey, 989 F.2d at 1009). Such a sanction is appropriate
when there has been an order compelling discovery, a willful violation of that
order, and prejudice to the other party. Larson, 242 F.3d at 817; Carey, 186
F.3d at 1019. Those criteria are, as explained by the Magistrate Judge, more
than satisfied in this case.
The Court has considered whether other sanctions might be
appropriate. The entry of default judgment should be a rare judicial act.
Comiskey, 989 F.2d at 1009. The Court is mindful of the defendants'
opportunity to be heard, and the strong policy in favor of deciding a case on
the merits and against depriving a party of his day in court. Carey, 186 F.3d
at 1020. But monetary sanctions and an inference of spoliation have already
been deployed in this case to little effect. See filing 263. Default judgment is
appropriate when the party's conduct includes willful violations of court
rules, contumacious conduct, or intentional delays. Inman, 120 F.3d at 119;
see also Comiskey, 989 F.2d at 1009. And when the facts show willfulness and
bad faith, as in this case, the Court need not investigate the propriety of a
less extreme sanction. Larson, 242 F.3d at 817-18.
This case is, in fact, strikingly similar to Carey, in which the
defendants falsely denied the existence of documents, then resisted
production of documents and failed to produce documents that were clearly
responsive to the plaintiff's discovery requests. 186 F.3d at 1020. The
defendants in that case had lied during the discovery process, sometimes
under oath, presenting a "direct affront to the court." Id. at 1021. The number
of documents at issue, the Eighth Circuit said, made it implausible that the
defendants' omissions could be explained by a failure to recall seeing them.
Id. at 1021-22. In sum, their efforts "to deny and conceal evidence, and to
provide false and misleading testimony, seriously threatened the integrity of
the trial as well as the judicial process in general[,]" warranting default
judgment against them. Id. at 1021-22. See also Haskins v. Lister, 626 F.2d
42, 43 (8th Cir. 1980).
The Court also notes West's request for a telephonic evidentiary
hearing on this matter. Filing 377 at 3. No hearing is necessary before
sanctions are imposed where the record demonstrates a willful and bad faith
abuse of discovery and the non-cooperating party could not be unfairly
surprised by the sanction. Carey, 186 F.3d at 1022 (citing Comiskey, 989 F.2d
at 1012). In any event, West had the opportunity to respond to the plaintiff's
motion for sanctions and object to the Magistrate Judge's findings and
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recommendation, and these matters have been fully and repeatedly litigated,
satisfying the requirements of due process. Id. at 1022-23. The Court will not
grant West's request for a telephonic hearing.
Instead, the Court will adopt the Magistrate Judge's findings and
recommendation. The Court will, as a sanction, strike the defendants'
answer, see Carey, 186 F.3d at 1022, and direct the Clerk of the Court to
enter the defendants' default. Because evidence will be necessary to establish
the plaintiff's damages and the amount of any award of attorney fees, the
Court will direct the Magistrate Judge to progress this case toward a
determination of damages pursuant to Fed. R. Civ. P. 55(b)(2).
IT IS ORDERED:
1.

West's objection to the Magistrate Judge's findings and
recommendation, styled as a "Motion in Opposition to
Findings and Recommendations" (filing 377), is overruled.

2.

Friedman's "Objection to Findings and Recommendation of
Default Dated 4/8/13" (filing 379) is overruled.

3.

The Magistrate Judge's Findings and Recommendation
(filing 376) are adopted.

4.

The defendants' operative answer (filing 133) is stricken.
Default is entered against all defendants as a discovery
sanction. The Clerk of the Court is directed to enter the
defendants' default pursuant to Fed. R. Civ. P. 55(a).

5.

A default judgment shall be entered upon the plaintiff's
Second Motion for Sanctions (filing 351) pursuant to Fed.
R. Civ. P. 55(b)(2) and NECivR 55.1(c). The plaintiff shall
be afforded an opportunity to prove not only the amount of
damages at issue, but the degree and extent of each
defendant's culpability in causing those damages.

6.

The United States Magistrate Judge is directed to progress
this case to a final resolution.

7.

The Clerk of the Court is directed to mail and email a copy
of this filing to each of the defendants.

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Dated this 8th day of May, 2013.
BY THE COURT:

John M. Gerrard
United States District Judge

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