Marx Industries, Inc. v. Baseline Licensing Group, LLC
Filing
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ORDER granting 53 Motion for Entry of Judgment as a Sanction; adopting 54 Memorandum and Recommendations. Signed by District Judge Richard Voorhees on 8/23/2011. (cbb)
THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
STATESVILLE DIVISION
CIVIL ACTION NO.: 5:09-cv-136
MARX INDUSTRIES, INC.,
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Plaintiff,
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vs.
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BASELINE LICENSING GROUP,
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LLC,
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Defendant
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vs.
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CONSUMER SPECIALTIES
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INCORPORATED OF NORTH
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CAROLINA,
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Third-Party
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Defendant.
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___________________________________ )
ORDER
THIS MATTER is before the Court on Plaintiff’s “Motion for Entry of Judgment as a
Sanction (Doc. #53) filed June 24, 2011. Plaintiff seeks a default judgment against Defendant
Baseline as a Rule 37 sanction for Defendant’s ongoing failures to comply with the discovery
obligations imposed by the Federal Rules of Civil Procedure and this Court's orders. Despite the
sanction sought in Plaintiff’s Motion, the pro se Defendant has not responded and the time for
filing a responsive brief has long expired. Because each of the four factors set forth in Wilson v.
Volkswagen of America, Inc., 561 F.2d 494, 503-05 (4th Cir.1977), strongly favors the entry of
default judgment as a sanction for Defendant’s non-compliance, this Court will grant Plaintiff’s
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Motion for Entry of Judgment as a Sanction.
BACKGROUND
A detailed discussion of the factual background and procedural history in this matter is
contained in the Court’s “Order Denying Plaintiff’s Motion for Judgment on the Pleadings”
(Doc. # 39); Order (Doc. # 36) (staying discovery pending resolution of Plaintiff’s Motion for
Judgment on the Pleadings); and Order (Doc. #46) (granting in part Plaintiff’s Motion to Compel
Discovery and for Sanctions, ordering Defendant to serve complete supplemental discovery
responses on or before May 10, 2011).
In its April 19, 2011 “Order,” the Court stated:
Recognizing that Defendant has not been warned previously of the likely
consequences of its failure to perform its responsibilities as a litigant, the Court will
order Defendant to make full supplemental discovery responses, but will withhold
recommending imposition of discovery sanctions pending Defendant’s compliance
with this Order.
(Doc. # 46, 2).
The Court went on to expressly warn Defendant as follows:
Accordingly, the Court warns Defendant . . . that any failure to respond to Plaintiff’s
Document Production Requests, to respond to any of Plaintiff’s other reasonable
discovery requests, or to otherwise comply fully with any of the Court’s Orders, the
Local Rules, or the Rules of Civil Procedure may result in the imposition of
sanctions. Sanctions can include Defendant . . . being required to pay Plaintiff’s
costs, including reasonable attorneys’ fees, and may also include entry of default
judgment.
Id. (emphasis in original).
Despite this clear warning, Defendant has not served the discovery responses that were
ordered by the Court, and as noted above, has failed to respond to this Motion for Entry of
Judgment. Further, Defendant did not object to the memorandum and recommendation issued by
Magistrate Judge Cayer on July 22, 2011, wherein Magistrate Judge Cayer recommended this
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court grant Plaintiff’s Motion for Entry of Judgment as a Sanction because “no less than entry of
default judgment will be effective.” (Doc. # 54, 3)
DISCUSSION
This Court has authority to impose sanctions against a party for failing to participate in
discovery, including granting a default judgment against the offending party. Fed. R. Civ. P.
37(b)(2)(A)(vi). Further, the Court “must require the party failing to act, the attorney advising
that party, or both” to pay the reasonable expenses caused by the failure, “unless the failure, was
substantially justified or other circumstances make an award of expenses unjustified.” Fed. R.
Civ. P. 37(d)(1)(B)(3). While entry of default and default judgment often occur under Rule 55,
the Federal Rules of Civil Procedure make clear that Rule 55 is not the exclusive avenue for
entering a default judgment. Indeed, as Wright and Miller point out:
Rule 55(a) does not represent the only source of authority in the rules for
the entry of a default that may lead to judgment. As a result, a party who
has filed a responsive pleading or otherwise defended still may be found
in default for noncompliance with the rules at some later point in the
action. For example Rule 37(b)(2)(C) and Rule 37(d) both provide for the
use of a default judgment as a sanction for violation of the discovery rules.
10A Wright, Miller, & Kane, Federal Practice and Procedure: Civil 3d § 2683, at 19 (3d ed.
1998).1
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Other district courts have found default judgment an appropriate sanction under Rule 37
when faced with similar Defendants who have failed to respond or provided evasive and
incomplete discovery responses,. See Mattivi Bros. Leasing, Inc. v. Ecopath Industries, LLC,
2010 WL 5103050 (D. Ariz. Dec. 9, 2010); Klehr, Harrison, Harvey, Branzburg & Ellers, LLP v.
Spencer Trask Specialty Group, LLC, 2009 WL 3233800 (E.D. Pa. Oct. 6, 2009); Plumbers
Union Local No. 690 v. F.P.S. Plumbing, Inc., 2009 WL 2591153 (E.D. Pa. Aug. 20, 2009);
National City P’ship Solutions, Inc. v. Midwest Financial & Mortgage Services, Inc., 2009 WL
170668 (S.D. Ohio Jan. 22, 2009); United States v. Smith, 2009 WL 144904 (W.D. La. Jan. 20,
2009).
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Fourth Circuit precedent strongly suggests that a warning and opportunity to comply are
prerequisites to rendering a default judgment under Rule 37. See Hathcock v. Navistar Int'l.
Transp. Corp., 53 F.3d 36, 40-41 (4th Cir. 1995) (“[A] party ‘is entitled to be made aware of
th[e] drastic consequence[s] of failing to meet the court's conditions at the time the conditions
are imposed, when he still has the opportunity to satisfy the conditions and avoid’ the sanction.”)
(quoting Choice Hotels Int'l v. Goodwin & Boone, 11 F.3d 469, 473 (4th Cir. 1993)); see also
Anderson v. Found. for Advanc., Educ. and Employment of Am. Indians, 155 F.3d 500, 504 (4th
Cir.1998); Mut. Fed. Sav. & Loan Ass'n v. Richards & Assocs., 872 F.2d 88, 93-94 (4th
Cir.1989).
Courts have broad discretion to impose sanctions for abuses of the discovery process, and
Rule 37 explicitly makes available the sanction of “rendering a default judgment against the
disobedient party.” Fed. R. Civ. P. 37(b)(2)(A)(vi); see also Fed. R. Civ. P. 37(c)(1)(C), (d)(3).
To be sure, the drastic sanction of entering a default judgment is appropriate only “where the
party's conduct amounts to flagrant disregard and willful disobedience of discovery orders.”
United States v. Certain Real Property Located at Route 1, Bryant, Ala., 126 F.3d 1314, 1317
(11th Cir. 1997) (citation omitted); see also Adolph Coors Co. v. Movement Against Racism and
the Klan, 777 F.2d 1538, 1542 (11th Cir. 1985) (“Sanctions may also be imposed to punish those
guilty of willful bad faith and callous disregard.”). A violation of a discovery order caused by
simple negligence, misunderstanding, or inability to comply will not justify a Rule 37 default
judgment or dismissal. Id.
In determining whether to impose a particular sanction, a court must consider the four
Wilson factors: (1) whether the non-complying party acted in bad faith, (2) the prejudice
suffered by the other party, (3) the need for deterrence, and (4) the effectiveness of less drastic
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sanctions. Wilson, 561 F.2d at 503-05; accord Anderson v. Found. for Advanc., Educ. and
Employment of Am. Indians, 155 F.3d 500, 504 (4th Cir. 1998); Mut. Fed. Sav. & Loan Ass'n v.
Richards & Assocs., 872 F.2d 88, 92 (4th Cir. 1989). This Court finds that each of the Wilson
factors weighs heavily in favor of rendering a default judgment against Defendant Mann
Bracken.
Regarding the first factor, evidence of Defendant’s bad faith is strong. Defendant has
been afforded ample opportunity to comply with this Court’s orders regarding discovery. Rather
than heed this Court’s warnings, Defendant has willfully chosen to end its participation in the
discovery process and refuses to respond to counsel for Plaintiff. Defendant’s failures “are
neither minor nor few and cannot reasonably be attributed to mere oversight or a mistaken but
good faith belief that [Defendant complied with the rules of discovery.]” Calkins v. Pacel Corp.,
2008 WL 2311565, *6 (W.D. Va. June 4, 2008) (granting motion for default judgment based on
Rule 37 due to Defendants’ inadequate and evasive discovery responses).
The second factor of the Wilson test, examining the prejudice suffered by the other party,
also weighs in favor of this Court granting Plaintiff’s motion. Defendant’s non-responsiveness
precludes Plaintiff from pursuing its claims. A non-responsive Defendant prejudices a Plaintiff
who seeks a determination of its claims on the merits. Without the ability to obtain the evidence
Plaintiff seeks through discovery, Plaintiff is hampered in proving its case and has therefore
suffered substantial prejudice as a result of Defendant’s discovery abuses.
The third factor under Wilson, stressing the need for deterrence, similarly weighs in favor
of this Court granting Plaintiff’s motion for default judgment. “If litigants routinely followed the
example set by [Defendant] in this case, the civil justice system would be unable to function.”
Calkins v. Pacel Corp., 2008 WL 2311565, *7 (W.D. Va. June 4, 2008). The circumstances in
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the instant case are similar to, if not worse than, those presented in Mut. Fed. Sav. & Loan
Ass’n, where the Fourth Circuit affirmed a sanction of default judgment and provided guidance
on the need for deterrence:
Even though the defendants may have made efforts to comply, the attempts were
lastditch and only offered when it became crystal clear that they were going to lose
the case unless they did something. In the context here, the things done did not add
up to an adequate “something.” Entrance of default judgment against the defendants
now is not punishment for their “compliance” as they would have it characterized,
but an unmistakable message to them and others that the judicial system will not
tolerate repeated misconduct never wholly remedied in the future. To 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.
Mut. Fed. Sav. & Loan Ass’n, 872 F.2d at 94.
As to the fourth factor, Defendant’s actions have made clear that a less drastic sanction
would not be effective in securing Defendant’s compliance with its discovery obligations and
this Court’s orders. As noted in the Magistrate Judge’s Order, failure to respond to discovery
requests may result in the imposition of sanctions, including Defendant being required to pay
Plaintiff’s costs, including reasonable attorneys’ fees, and may also include entry of default
judgment. More than sufficient time has passed since the Magistrate Judge’s Order and
Defendant has not responded to the Order. Simply put, Defendant has been afforded more than
ample time to respond to Plaintiff’s discovery requests and has been warned by this Court of the
implications of failure to respond. See Cotton States Mut. Ins. Co. v. Sellars, 2008 WL 4601015,
*4 (M.D. Ala. Oct. 15, 2008) (“Defendant . . . displays the requisite bad faith and willfulness to
justify entry of default. Defendant . . . ignored the Court’s order granting the Motion to Compel .
. . [and] Defendant did not comply with the mandated time frame.”).
A review of the Complaint confirms that Plaintiff does assert detailed facts which are
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sufficient to state cognizable claims against Defendant. Defendant’s non-responsiveness has
halted the adversarial dispute resolution process. Defendant’s actions “are just the sort of
dilatory tactics for which the default judgment mechanism was made.” Cotton States Mut. Ins.
Co. v. Sellars, 2008 WL 4601015, at *5. Accordingly, because Defendant has willfully failed to
comply with an Order of this Court, Plaintiff’s Motion for Entry of Judgment as a Sanction
(Doc. #53) is GRANTED.
CONCLUSION
THEREFORE, IT IS HEREBY ORDERED that Plaintiff’s Motion for Entry of
Judgment as a Sanction (Doc. #53) is GRANTED.
Signed: August 23, 2011
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