SANFORD et al v. BRACEWELL LLP
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE JOEL H. SLOMSKY ON 6/27/17. 6/28/17 ENTERED AND COPIES E-MAILED.(kw, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
CRAIG SANFORD and
MARY JO SANFORD,
June 28, 2017
This case involves allegations of legal malpractice arising from Defendant Bracewell
LLP’s 1 representation of Plaintiffs Craig and Mary Jo Sanford (“the Sanfords”). The parties
were ordered to arbitrate this dispute. They currently disagree over whether Plaintiffs can afford
the costs associated with arbitration. In this regard, this Court ordered Plaintiffs to produce
financial documents demonstrating their inability to afford the arbitration costs. On repeated
occasions, however, Plaintiffs have failed to fully comply with the Court’s directives, and in fact
have supplied documentation that suggests they can afford to pay the costs of arbitration.
Before the Court are Defendant’s Motions to Dismiss Pursuant to Rule 41(b) (Doc. Nos.
47, 68) and Plaintiffs’ Motion for Approval of Arbitration Order No. 1 and to Lift the Stay for
Purposes Stated in the Order (Doc. No. 48). 2 For reasons that follow, the Court will withhold
Bracewell LLP was formerly known as Bracewell & Giuliani, LLP.
As the Court will explain below, Plaintiffs’ Motion for Approval of Arbitration Order No. 1
and to Lift the Stay for Purposes Stated in the Order (Doc. No. 48) may be denied because
Plaintiffs have failed to comply with multiple Orders of this Court requiring the Sanfords to
ruling on the Motions (Doc. Nos. 47-48, 68) and will afford Plaintiffs another opportunity to
return to arbitration and pay the required fees as determined by the arbitration panel, including
the initial deposit of $2,500 for Arbitrator Crane’s fees. If Plaintiffs fail to pay the initial deposit
of $2,500 and any other required fees by July 18, 2017, this Court should be notified by
Defendant, and the Motions to Dismiss (Doc. Nos. 47, 68) will be granted and the Plaintiffs’
Motion (Doc. No. 48) will be denied.
Craig and Mary Jo Sanford spent their careers building a successful medical waste
disposal business. (Doc. No. 1-1 at ¶ 6.) In 2005, the Sanfords sold the business for more than
$14 million. (Id. at ¶ 7.) Around two years later, the Sanfords decided to move approximately
$12.5 million from the proceeds of the sale into an account with a company called SCG
International, LLC (“SCG”). (Id. at ¶¶ 11, 14.) Jamie Smith, the purported Chief Executive
Officer (“CEO”) of SCG, originally offered to place the Sanfords’ “money in an offshore interest
bearing account and return it to them in [eighteen] months for a small service charge.” (Id. at ¶
12.) After relying on Smith’s representations and moving the funds into an account Smith
controlled, the Sanfords immediately recognized problems. (Id. at ¶¶ 14, 17.) Craig Sanford
“repeatedly attempted to contact Smith by phone and email to check on [the] money and its
security.” (Id. at ¶ 18.) However, the Sanfords were “constantly put off and told that . . . Smith
was not available, or that Smith would have to return their call at another time.” (Id.) Unable to
contact Smith for more than eighteen months, the Sanfords sought the assistance of an attorney.
On September 9, 2009, Craig Sanford entered into an attorney-client relationship with
Jonathan N. Halpern, Esquire, of Bracewell & Giuliani LLP (“Bracewell” or “the firm”) to assist
disclose their finances. As a result, the Court is unable to determine whether Plaintiffs can
afford the cost of arbitration.
him and his wife Mary Jo in recouping their investment. (Id. at ¶¶ 25-26.) Upon signing the
firm’s representation agreement, Craig Sanford paid an initial fee of $50,000 to Bracewell in
exchange for the firm’s “representation to recover funds extended to SCG.” (Doc. No. 1-1 at
The Sanfords paid additional fees throughout Bracewell’s representation.
however, was unsuccessful in recovering their investment. (Id. ¶¶ 25-44.)
Plaintiffs Craig and Mary Jo Sanford initiated this action in the Court of Common Pleas
of Bucks County, Pennsylvania, alleging professional negligence and breach of contract claims
against Defendant Bracewell. (Id. ¶¶ 47-62.) Plaintiffs allege that Defendant was negligent in
improperly investigating the whereabouts of the Sanfords’ money, failing to locate the funds, and
declining to file suit against SCG to recoup the investment, among other lapses in professional
standards of legal representation. (Id. at ¶ 50.) Plaintiffs also allege that Defendant breached
the representation agreement “by failing to exercise the requisite degree of professional skill and
knowledge in its representation of Plaintiffs and by failing to provide legal services both
expressly stated and as implied in the . . . agreement.” (Id. at ¶ 59.)
On March 6, 2013, Defendant removed the action to this Court. (Doc. No. 1.) One week
later, Defendant filed a Motion to Stay Pending Arbitration, which requested that the Court stay
this litigation pending the outcome of arbitration proceedings as dictated by the representation
agreement. (Doc. No. 3.) What followed was a protracted effort by Plaintiffs to avoid arbitration
and have a jury trial.
Plaintiffs originally challenged arbitration on the grounds that the arbitration clause in the
representation agreement “goes against legal ethics and public policy.” (Doc. No. 7 at 9.) The
parties litigated this issue for more than one year. (See Doc. Nos. 3, 7, 14-24, 29-36.) On March
19, 2014, this Court ordered that Craig Sanford’s claims must be pursued in arbitration, but that
Mary Jo Sanford was entitled to a jury trial. (Doc. Nos. 37-38.) Defendant appealed. The
United States Court of Appeals for the Third Circuit held that Mary Jo Sanford was bound by the
same terms as her husband and also must adjudicate her claims through arbitration. Sanford v.
Bracewell Giuliani LLP, 618 F. App’x 114, 118-19 (3d Cir. 2015).
Plaintiffs filed a demand for arbitration in the International Institute for Conflict
Prevention and Resolution (“IICPR”), the arbitral forum designated in the representation
agreement. (Doc. No. 48 at 3.) Under the rules of the IICPR, the parties were to select a panel
of three arbitrators. (Id.) The Sanfords appointed Edward Rubenstone as its party-arbitrator, and
Bracewell designated Stephen Younger.
(Doc. No. 68 at 10.) Arbitrator Rubenstone and
Younger chose the final arbitrator to complete the panel, the Honorable Stephen G. Crane (Ret.)
from JAMS. 3 (Id.) Following the selection of the panel, a dispute arose over the cost of the
The Sanfords Challenge the Cost of the Arbitration Proceedings
On February 25, 2016, the panel held an initial telephone conference with the parties.
(Doc. No. 68 at 10.) In advance of the initial conference, JAMS had requested that each party
deposit $2,500 for Arbitrator Crane’s fees. (Id.) Although Defendant paid its deposit, Plaintiffs
did not. (Id.) During the telephone conference, counsel for Plaintiffs for the first time explained
Plaintiffs’ hesitancy to pay any fees associated with arbitration. Counsel balked at the arbitrator
fee schedule, which noted that Arbitrator Rubenstone would receive $400 per hour, Arbitrator
Younger would receive $990 per hour, and Arbitrator Crane would receive $1,100 per hour. In
light of Plaintiffs’ reluctance to pay the necessary costs, the panel accepted the following
suggested procedure to resolve any issues associated with arbitration related expenses:
JAMS, formerly known as Judicial Arbitration and Mediation Services, Inc., is an organization
of alternative dispute resolution services, including mediation and arbitration.
MR. BUCKLEY [counsel for Defendant]: If Mr. Haines [counsel for Plaintiffs]
could respond in writing to the panel, including me, with the Sanfords’ position
regarding fees, either they’re unwilling or unable to pay – and he should make
clear which it is – then I can respond to that with a request for information in
writing that we believe is necessary to evaluate our position going forward. And
then the panel can decide, you know, what it is they want ordered produced.
I think we can probably do all of that without another phone call.
JUDGE CRANE: Excellent. Do you agree with that, Mr. Rubenstone?
MR. RUBENSTONE: Sounds good to me.
JUDGE CRANE: Mr. Younger?
MR. YOUNGER: Same here.
JUDGE CRANE: Okay. Let’s proceed that way. I haven’t heard any pushback
from Mr. Haines on that.
MR. HAINES: Yeah. Oh I have no pushback.
(Doc. No. 68-6 at 77:13-78:16.)
Rather than explaining the Sanfords’ position regarding
arbitration fees, counsel for Plaintiffs sent an email to the panel on March 8, 2016 stating that the
Sanfords did “not agree with the projected expenses and wish for me to return to Federal Court
for further relief there.” (Doc. No. 68-8.) In response, Defendant asked the panel to order
limited discovery of the Sanfords’ finances to explore their claim of inability or hesitancy to pay
the arbitration fees, pursuant to the United States Supreme Court’s ruling in Green Tree Financial
Corp. v. Randolph, 531 U.S. 79 (2000) and the United States Court of Appeals for the Third
Circuit’s decision in Blair v. Scott Specialty Gases, 283 F.3d 595, 609 (3d Cir. 2002). 4 Further
In Green Tree Financial, the Supreme Court held that an arbitration agreement, which does not
mention arbitration costs, is not per se unenforceable because it fails to adequately protect a
party from potentially steep arbitration expenses. 531 U.S. at 81, 91-92. Instead, the party
challenging arbitration on this ground bears the burden of showing that the arbitration
proceeding would be prohibitively expensive. Id. Furthermore, the United States Court of
Appeals for the Third Circuit concluded in Blair that discovery on arbitration costs and the
correspondence among the parties and the panel ensued, but did not resolve the issue of
apportioning arbitration expenses. On September 1, 2016, rather than apportion fees, the panel
suspended arbitration by issuing an Order (“Order No. 1”). 5 Order No. 1 of the arbitration panel
inability to pay is integral to the Green Tree Financial analysis of prohibitive expense
allegations. Blair, 283 F.3d at 609.
The panel suspended arbitration by issuing an Order (“Order No. 1”), which states as follows:
The Panel Chair previously ruled that payment of the fees of the partyappointed arbitrators is to be the responsibility of the party making the
appointment and the payment of the Panel Chair’s fees and any related expenses
is to be split equally between the parties.
The Claimants [Sanfords], by their counsel’s email dated March 8, 2016,
disagreed with the projected expenses of this arbitration and asked to return to
United States District Court of the Eastern District of Pennsylvania where a
request to stay this arbitration had been litigated. In response to this
announcement, the Respondent [Bracewell] asked this Tribunal to sign a proposed
order that would direct the Claimants to produce specified financial information
and to submit to depositions. Without addressing this proposed order, Claimants’
counsel emailed the Panel on April 3, 2016, stating that it was not “economically
feasible to continue with this arbitration based on the costs outlined in” a
conference call held with the members of the Tribunal on February 25, 2016. He
announced the Claimants’ intention to make a motion in the District Court to
remand the matter to it. On April 5, 2016, the Respondent took the position that
there was no basis to remand the matter to District Court and that there was no
support of the claim of economic infeasibility for the Claimants to engage in this
arbitration. The Respondent renewed its request for the proposed order.
The Tribunal held a conference call with the parties on April 13, 2016. On
that call, the Respondent expressed its willingness to pay the Claimants’ share of
the Panel Chair’s arbitration fees and expenses but only for purposes of deciding
the fee payment issue. Respondent was reminded of the opportunity under Rule
17.5 to pay the full deposits on behalf of the Claimant so that the matter could be
heard on the merits. The parties were given the opportunity to brief the issue
Thereafter, Respondent paid the Claimant’s share of the arbitration fees of
the Panel Chair and related expenses for the limited purposes of having the
Tribunal determine whether the costs of this arbitration are prohibitive as
explained that because the Sanfords’ “economic infeasibility issues were not raised before [the
District] Court,” the panel declined to rule “on the financial ability to pay issues on the ground
that such issues may be better heard and determined by the District Court.” (Doc. No. 68-7 at
28.) The parties returned to this Court.
This Court Orders the Sanfords to Produce Evidence
Regarding Their Inability to Afford the Arbitration Proceedings
On October 19, 2016, this Court held a status conference with the parties in response to
the panel’s Order. (Doc. No. 46.) At the conference, the Court requested that “parties file
The Panel declined to sign the Respondent’s proposed order, but instead
set the matter down for an in-person oral argument which was held on July 19,
2016 in New York City.
At the July 19, 2016 hearing, Arbitrator Rubenstone disclosed that he had
represented the Town Supervisors of Falls Township in connection with a default
judgment that the Township previously obtained against the Claimants and
disclosed the background facts surrounding that representation. The parties have
confirmed that they have no objection to Arbitrator Rubenstone continuing to
serve as an arbitrator in this matter despite this disclosure.
Accordingly, it is hereby
ORDERED that given that various arbitrability issues were previously
litigated before the District Court but that the economic infeasibility issues were
not raised before that Court, the tribunal declines to rule on the financial ability to
pay issues on the ground that such issues may be better heard and determined by
the District Court. Accordingly, the parties are granted leave to file an appropriate
Motion with the District Court on the issues of the Claimants’ asserted financial
inability to engage in this arbitration. This Order is being entered without
prejudice to any future reference back to the Tribunal by the District Court as it
deems appropriate; and it is further
ORDERED that, for the reasons set forth above, this arbitration is hereby
suspended; and it is further
ORDERED that counsel are directed to submit periodic status updates to
the Tribunal as to the progress of the matters that are submitted to the District
(Doc. No. 68-7 at 26-30.)
motions . . . on their respective positions with regard to” the panel’s Order suspending arbitration
for failure to apportion costs. (Doc. No. 45.)
On October 31, 2016, Defendant filed a Motion to Dismiss Pursuant to Rule 41(b). (Doc.
No. 47.) Conversely, Plaintiff filed the instant Motion for Approval of Arbitration Order No. 1
and to Lift the Stay for Purposes Stated in the Order, which requested that the Court lift the stay
on this litigation pending the outcome of arbitration “for the limited purpose of evaluating
whether pursuing the claims in arbitration puts adjudication out of reach for the Plaintiffs
because of the expense of the arbitration.” (Doc. No. 48 at 1.)
Each party responded in
opposition to the other’s outstanding Motion. (See Doc. Nos. 50-51, 53.)
On November 30, 2016, the Court held oral argument on the Motions. (See Doc. No.
56.) During the argument, the Court indicated that it would lift the stay for the purpose of
allowing limited discovery into the Sanfords’ ability to pay for the arbitration. The Court
ordered the Sanfords to produce a broad range of documents, including:
1. “Five years’ worth of financial records, to include all tax returns, personal and corporate.
Certainly of the corporations identified . . . and any other corporations the Sanfords might
have an interest in.” (Doc. No. 58 at 57:15-19.)
2. “Any bank statements, personal and/or corporate . . . for that five-year period.” (Id. at
3. “Disclosure of any real estate owned by the Sanfords, or in which they have an interest,
whether it’s legal or equitable.” (Id. at 57:23-25.) As well as disclosure of valuations for
this real estate and any encumbrances on these properties. (Id. at 63:1-20.)
4. If any money was recovered in Plaintiffs’ lawsuit against Smith, and if so, how much
money was recovered. (Id. at 58:1-6.)
The Court afforded the Sanfords sixty days to produce these documents. (Id. at 59:23-60:13.)
Plaintiffs therefore had until the end of January 2017 to submit their financial documents. (Id.)
The Court further explained that if the Sanfords were having difficulty collecting all the
documents within the sixty day period, they should turn over to Defendant whatever they had
accumulated and explain that Plaintiffs are still seeking documentation. 6 The Court also noted
that if there was any evidence of sandbagging or failure to produce the financial documents, the
Court would “take action, and very strong action.” (Id. at 34:16-17.)
The Sanfords Fail to Comply with the Court’s Order to
Produce Financial Documentation That Would Demonstrate Their
Inability to Afford the Cost of Arbitration
Despite the Court’s Order, the Sanfords did not produce any documents before the
deadline. On February 1, 2017, Defendant informed the Court that it had not received any
financial documents from Plaintiffs. (Doc. No. 60.) A week later, counsel for Plaintiffs notified
the Court that:
Despite a clear request for five years of tax returns, financial statements, bank
statements (personal and corporate), disclosure of real estate, disclosure of
encumbrances on that real estate, and any valuations or appraisals in the Sanfords’
possession and the recovery of items of damages from certain lawsuits, our office
received the first two pages of state (Pa form 40) and federal income tax returns
(form 1040) for 2014 and 2015 and one deed. Those materials are enclosed with
this letter. I have asked my clients to sign an authorization to have full and
complete returns released by the IRS.
During the hearing, the Court explained:
THE COURT: And if by then you’re having problems getting the documents from
the IRS or otherwise, why don’t you notify the Court and we’ll see where we
stand, and we’ll give you more time if need be.
MR. HAINES: Yes, sir.
THE COURT: But, you know, I think you should at the very least, whatever you
can accumulate within the 60 days, by the end of the 60 days turn over to the
defense, and a letter and indicated in the letter what you’re still seeking, if you’re
still seeking documentation. And you can copy the Court on that letter.
And if you need more time, I’ll consider it. It’s a lot of information, and I
recognize that . . . .
(Doc. No. 58 at 60:3-15.)
(Doc. No. 61.) Although the Sanfords had produced one deed and a few pages from their 2014
and 2015 tax returns, they continued to violate the Court’s Order by failing to produce the
necessary financial documents to make a determination on their inability to afford arbitration
The Sanfords Continue to Violate the Court’s Orders to
Produce Financial Documentation That Would Demonstrate Their
Inability to Afford the Cost of Arbitration
On February 9, 2017, in light of the Sanfords’ failure to comply with the Court’s Order to
produce financial documentation, Defendant renewed its request to dismiss the action. (Doc. No.
62.) In response, Plaintiffs’ counsel requested “a hearing . . . so that the Sanfords may appear
before the Court to explain themselves in their own words and that they can hear from the Court
directly regarding the consequence of a failure of compliance” with the Court’s Order. (Doc. No.
63.) The Court granted this request.
On February 21, 2017, the Court held a hearing with counsel for the parties and the
Sanfords. The Court noted the Sanfords’ presence at the hearing. (Doc. No. 68-8 at 3:8.) At that
time, the Court explained the status of the parties’ discovery on the Sanfords’ inability to pay the
costs of arbitration. It reiterated that the Sanfords were previously ordered to provide financial
1. “Five years’ worth of personal and corporate tax returns, and not just the 1040 cover
sheet but all the schedules.” (Doc. No. 68-8 at 5:13-15.)
2. “Five years’ worth of bank statements, personal and corporate.” (Id. at 5:15-16.)
3. Disclosure of “their real estate holdings and any encumbrance on the real estate.” (Id. at
4. If any money was recovered from the Sanfords’ lawsuit against Smith, and if so, how
much money was recovered. (Id. at 5:18-19.)
The Sanfords had failed to produce these documents. (Id. at 5:19-20.) Instead, the
Sanfords had turned over one deed and a few pages from their 2014 and 2015 tax returns, which,
taken together, were inadequate to make a determination on their inability to pay arbitration
related expenses. The Court afforded Plaintiffs with another thirty days to produce the financial
documents. (See Doc. No. 66.) Plaintiffs acknowledged what was required and stated that they
“will comply.” (Doc. No. 68-8 at 18:5:8.) Plaintiffs therefore were granted additional time to
make the necessary financial disclosure, and were given until March 23, 2017 to comply with the
Court’s Orders. (See Doc. No. 65.)
Despite these instructions, Plaintiffs yet again failed to comply with the Court’s Orders.
Although Plaintiffs submitted selected tax returns, statements for two bank accounts, and an
email listing four properties they owned, these disclosures did not create a complete picture of
the Sanfords’ finances or their inability to pay the costs associated with arbitration. (Doc. No.
68-9 at 2-5.)
On April 24, 2017, Defendant filed a second Motion to Dismiss Pursuant to Rule 41(b),
arguing that the Sanfords failed to produce the required documents ordered by the Court. (Doc.
No. 68.) Presently before the Court are Defendant’s Motions to Dismiss (Doc. Nos. 47, 68) and
Plaintiffs’ Motion for Approval of Arbitration Order No. 1 and to Lift the Stay for Purposes
Stated in the Order (Doc. No. 48). The parties have fully briefed the three Motions, which are
now ripe for disposition. 7
In reaching a decision, the Court has considered: Plaintiffs’ Complaint (See Doc. No. 1),
Defendant’s Motion to Dismiss (Doc. No. 47), Plaintiffs’ Response in Opposition (Doc. No.
50), Defendant’s Reply (Doc. No. 53), Plaintiffs’ Motion for Approval of Arbitration Order
No. 1 and to Lift the Stay for Purposes Stated in the Order (Doc. No. 48), Defendant’s
Response (Doc. No. 51), oral argument held on the Motions on November 21, 2016 (Doc. Nos.
56, 58), letters received from the parties (Doc. Nos. 60-63, 71), a telephone conference held on
February 14, 2017 (Doc. No. 64), an additional hearing held on February 21, 2017 (Doc. Nos.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 41(b) provides that “If the plaintiff fails to prosecute or
to comply with these rules or a court order, a defendant may move to dismiss the action or any
claim against it.” Fed. R. Civ. P. 41(b). In determining whether to dismiss a case due to a
plaintiff’s failure to prosecute, a court considers the six factors set forth in Poulis v. State Farm
Fire & Casualty Co.:
(1) the extent of the party’s personal responsibility; (2) the prejudice to the
adversary caused by the failure to meet scheduling orders and respond to
discovery; (3) a history of dilatoriness; (4) whether the conduct of the party or the
attorney was willful or in bad faith; (5) the effectiveness of sanctions other than
dismissal . . . and (6) the meritoriousness of the claim or defense.
747 F.2d 863, 868 (3d Cir. 1984). Courts are required to consider the Poulis factors because
“dismissal with prejudice is, undeniably, a drastic sanction.” In re Asbestos Products Liab. Litig.
(No. VI), 718 F.3d 236, 246 (3d Cir. 2013). However, no single Poulis factor is dispositive, and
all six factors need not be satisfied in order for a court to dismiss a complaint. Briscoe v. Klaus,
538 F.3d 252, 263 (3d Cir. 2008).
Defendant filed two Motions to Dismiss pursuant to Fed. R. Civ. P. 41(b), arguing that
Plaintiffs repeatedly failed to comply with the Court’s Orders to arbitrate and to make financial
disclosures related to their inability to afford arbitration costs. (Doc. Nos. 47, 68.) Defendant
argues that the “Sanfords’ repeated and willful failure to comply, first, with the Court’s orders to
arbitrate and, later, with the Court’s order to support their claimed hardship with financial
disclosures justifies dismissal with prejudice under Rule 41(b).” (Doc. No. 68 at 21.)
65-66), Defendant’s Second Motion to Dismiss (Doc. No. 68), Plaintiffs’ Response in
Opposition (Doc. No. 72), Defendant’s Reply (Doc. No. 73), Plaintiffs’ Motion for Leave to
File a Supplement to the Response in Opposition (Doc. No. 74), Defendant’s Response to the
Motion to Supplement (Doc. No. 75), and Plaintiffs’ Supplemental Response in Opposition to
Defendant’s Motion to Dismiss (Doc. No. 77).
As previously noted, the United States Supreme Court held in Green Tree Financial Corp.
v. Randolph that an arbitration agreement, which does not mention arbitration costs, is not per se
unenforceable on the theory that it fails to adequately protect a party from potentially steep
arbitration expenses. 531 U.S. 81, 91-92 (2000). Instead, the party challenging arbitration on
this ground bears the burden of showing that arbitration would be prohibitively expensive. Id.
Furthermore, the United States Court of Appeals for the Third Circuit concluded in Blair v. Scott
Specialty Gases that discovery on arbitration costs and the inability to pay is integral to the
Green Tree Financial analysis of prohibitive expense allegations. Blair v. Scott Specialty Gases,
283 F.3d 595, 609 (3d Cir. 2002). Plaintiffs therefore had the burden of proving that the cost of
arbitration was prohibitively expensive. However, Plaintiffs have repeatedly failed to meet this
To date, Plaintiffs have produced the following financial documents: partial tax returns,
partial statements for two bank accounts ending in -2920 and -9191, and a list of four properties
they own. These documents, taken together, do not show a complete picture of the Sanfords’
finances, nor do they satisfy the Court’s Orders to make a complete financial disclosure. 8 The
Defendant argues that the Plaintiffs’ financial disclosures are incomplete because they have not
provided the following documentation:
No Financial Statement. Although the Sanfords’ put their financial
circumstances at issue and bear the burden of demonstrating hardship to even
begin a conversation about the cost of arbitration, the Sanfords did not produce
any financial statements or other summary of current assets, liabilities, and net
worth. Considering this procedural posture and the obvious complexity of the
Sanfords’ finances, the Sanfords’ failure to produce this information—which the
Court referenced several times—demonstrates their willful disregard of the
No Investment Account Statements. The Sanfords’ tax return reflect
significant interest and dividend income ($386,892 in 2015) and large investment
advisory fees ($86,635 in 2015), both of which indicate that the Sanfords possess
substantial investment assets. Yes, the Sanfords did not produce any investment
account statements, nor did they provide any disclosure about the assets that are
generating this income and causing them to incur these fees. Their tax returns—
which reference numerous investment accounts (such as Voya Insurance and
Annuity, Charles Schwab, Energy Transfer Partners LP, Buckeye Partners LP, and
Wells Fargo Brokerage Services to name a few)—demonstrate that there are
relevant records that should have been produced in response to the Court’s order.
Incomplete Personal Bank Statements. While the Sanfords produced
selected bank statements for a William Penn Bank account ending in -2920, they
did not produce the five years of records ordered by the Court and appear to not
have produced statements for all of their bank accounts.
Incomplete Business Bank Statements. The Sanfords’ production of bank
statements for Sanford Motors is similarly deficient. They produced statements
for a William Penn Bank account ending in -9191, but once again failed to
produce the five years of records ordered by the Court—ending their production
in 2014. Their assertion that, they “do not maintain balance sheets, etc. for their
garage,” simply does not cut it. Sanford Motors filed taxes and therefore it must
have records, which the Sanfords did not disclose.
No Information on Recovery from Jamie Smith. The Sanfords have
represented they recovered some of their money from Jamie Smith and the Court
ordered that they disclose the details; however, the Sanfords did not provide any
information on this subject.
Incomplete Disclosure of Real Estate. On March 8, 2017, the Sanfords’
attorney wrote in an e-mail that, “[t]he real estate they own and it’s [sic.]
estimated value is:
Yardley, Pa. (business location and adjoining lot)
$600,000. There is a $400,000 bank lien (Wells Fargo) on the
15 N. Briar Hill Road
Marcus Hook Pa.
partial disclosure prevents the Court from making a determination on the Sanfords’ inability to
afford the arbitration proceedings.
The Extent of the Sanfords’ Personal Responsibility for
Failure to Prosecute Weighs in Favor of Dismissal
The first Poulis factor asks a court to analyze the extent of the party’s personal
responsibility in failing to prosecute his case. Poulis, 747 F.2d at 868. “Although no one factor
is dispositive, finding the party personally responsible for the delay is an important factor in
dismissing under Rule 41(b).” Carter v. Ryobi Techtronics, 250 F.R.D. 223, 228 (E.D. Pa. 2008).
In Carter, the defendant filed a motion to dismiss under Rule 41(b) due to the plaintiff’s
failure to prosecute. Specifically, the plaintiff failed to provide “medical, income, and workers
compensation evidence from the last five years” during discovery. Id. at 226. The court,
therefore, held a hearing to “personally instruct [the plaintiff] of his need to participate in the
prosecution of [his] case and his need to comply with the [c]ourt’s orders.” Id. at 228. Because
While this bare bones disclosure reflects $750,000 in equity, it falls well short of
the letter and spirit of the Court’s order. First the Sanfords did not provide an
address for three of the four properties. Second, the list does not include any
reference to the 31.35 acres of land in the “Silver Spruce Estates” or to the
property in Burleson, Texas, which are disclosed elsewhere. Third, the email does
not jibe with the Sanfords’ tax returns, which, for example (a) reflect that the
encumbered commercial property in Morrisville, valued by the Sanfords at
$250,000, generated more than $295,000 of income between 2008 and 2014; and
(b) contain references to numerous real estate investment entities
(Connor/Murphy Real Estate Inc. XII, Connor Group Real Estate VII, and Connor
Real Estate Income IX to name a few) and deductions for more than $400,000 in
losses associated with rental property.
(Doc. No. 68 at 18-20 (emphasis omitted).)
the plaintiff failed to comply with the court’s instructions, the court found that he was personally
responsible for the failure to prosecute and dismissed his case. 9 Id.
Like Carter, the Sanfords are personally responsible for failing to comply with the
Court’s Orders. They were present in court and heard firsthand the Court’s instructions on what
records must be produced. Therefore, this case does not involve a sympathetic situation where
innocent clients suffered dismissal due to dilatory counsel who represented them. The record
demonstrates that counsel conferred with the Sanfords about the importance of making the
required financial disclosures both to the arbitration panel and to this Court. (Doc. No. 61.)
In fact, Plaintiffs’ counsel requested that the Court hold a second hearing to impress upon
the Sanfords that they must comply with the Court’s Orders and submit the required financial
documents. (See Doc. No. 63 at 2 (“I ask that the Court hold a hearing before dismissing the
case on the basis of non-compliance with the Order so that the Sanfords may appear before the
Court to explain themselves in their own words and so that they can hear from the Court directly
regarding the consequence of a failure of compliance”).) On February 21, 2017, in accordance
with counsel’s request, this Court held a hearing to explain to the Sanfords the importance of
complying with the Court’s instructions to disclose their financial status. (Doc. No. 68-8.)
Otherwise, the Court had explained to the Sanfords that failure to comply may result in
The Court also noted that it expected full compliance from the Sanfords, not
The court in Carter also concluded that the plaintiff’s counsel was personally responsible for
the delay in litigation, due to his repeated failures to comply with the court’s scheduling orders
and discovery deadlines. Id.
On February 21, 2017, the Court told the Sanfords on the record that they were to “make full
disclosure of their financial assets . . . [i]f they’re going to proceed with th[is] litigation.”
(Doc. No. 68-8 at 10:19-21.) Additionally, the Court stated in its March 20, 2014 Order, that
Mr. Sanford had thirty (30) days to demand arbitration and warned that this action would be
dismissed if he did not pursue it. (Doc. No. 38.)
substantial compliance. (Id. at 14:2-4.) The Sanfords, however, have repeatedly failed to comply
with the Court’s directives for more than six months. Plaintiffs have failed to produce the
financial information needed to make an informed decision about their inability to afford
arbitration. For these reasons, the Sanfords are personally responsible for their failure to comply
with Court Orders and to prosecute their case. This first Poulis factor weighs in favor of
The Prejudice to Defendant Caused by Plaintiffs’ Failure
to Meet Scheduling Orders and Respond to Discovery
Weighs in Favor of Dismissal
The second Poulis factor examines the prejudice to the adversary caused by a plaintiff’s
failure to meeting scheduling orders and to respond to discovery. Poulis, 747 F.2d at 868.
“Prejudice includes ‘the excessive and possibly irremediable burdens or costs imposed on the
opposing party.’” Tracinda Corp. v. DaimlerChrysler AG, 502 F.3d 212, 243 (3d Cir. 2007)
(quoting Scarborough v. Eubanks, 747 F.2d 871, 876 (3d Cir. 1984)).
Here, the Sanfords’ failure to comply with Court Orders has prejudiced Bracewell by
imposing excessive and irremediable costs upon it. On October 31, 2016, Defendant filed a
Motion to Dismiss pursuant to Fed. R. Civ. P. 41(b), in light of Plaintiffs’ failure to disclose its
finances to the arbitration panel and proceed with the scheduled arbitration. (Doc. No. 47.) On
November 30, 2016, this Court held a hearing at which it ordered Plaintiffs to make such a
disclosure. (Doc. Nos. 56, 58.) Plaintiffs, however, failed to comply with the Court’s Order to
make financial disclosures related to their inability to afford arbitration. Because of Plaintiffs’
failure to comply, Defendant has attempted on several occasions to obtain the necessary
documentation from Plaintiff. (Doc. Nos. 60, 62.) On February 21, 2017, Defendant attended a
second hearing held by this Court in order to emphasize to the Sanfords the importance of
making the required financial disclosures. (Doc. Nos. 65-66.) Thereafter, Plaintiffs again failed
to comply with the Court’s Orders. Once again, Defendant contacted Plaintiffs in an effort to
retrieve this documentation. As a result, Defendant filed a second Motion to Dismiss pursuant to
Fed. R. Civ. P. 41(b). (Doc. No. 68.)
Defendant has repeatedly conferred with Plaintiffs to disclose their finances, has attended
multiple hearings to obtain these documents, and has filed multiple motions to dismiss this action
under Rule 41(b) because of Plaintiffs’ failure to turn over such documentation. Defendant has
spent more than six months and has incurred significant expense in litigating this narrow issue of
Plaintiffs’ finances, which Plaintiff put in issue but refuses to resolve. 11 Therefore, Defendant
has been prejudiced by Plaintiffs’ failure to comply. This second Poulis factor weighs in favor of
The Sanfords’ History of Dilatoriness Weighs in Favor of Dismissal
The third Poulis factor requires a court to consider the party’s history of dilatoriness.
Poulis, 747 F.2d at 868. “Extensive or repeated delay or delinquency constitutes a history of
dilatoriness.” Hoffman v. Palace Entertainment, 621 F. App’x 112, 115 (3d Cir. 2015) (quoting
Adams v. Trustees of N.J. Brewery Employees’ Pension Trust Fund, 29 F.3d 863, 874 (3d Cir.
1994)). Examples include “consistent non-response to interrogatories, or consistent tardiness in
complying with court orders.” Adams, 29 F.3d at 874.
The Sanfords have exhibited a history of dilatoriness. On November 30, 2016, this Court
ordered the Sanfords to disclose certain financial documents so that the Court could make a
determination on their inability to afford arbitration. (Doc. Nos. 56, 58.) The Court provided the
Sanfords with sixty days, or until the end of January, to make this production. (Doc. No. 58 at
From the record, it appears that Plaintiffs first raised the issue of inability to afford arbitration
on March 8, 2016, while the case was before the arbitration panel. (Doc. No. 68-7 at 4.) On
October 19, 2016, the parties returned to this Court and have been litigating this issue ever
since. (Doc. No. 44.)
59:23-60:13.) However, Plaintiffs failed to meet this deadline. In fact, Plaintiffs did not submit
any documentation within the initial sixty-day period. (Doc. No. 60 at 2.)
Thereafter, on February 21, 2017, the Court held a second hearing with the Sanfords
present to impress upon them the importance of complying with the Court’s Orders and
supplying the financial documentation. (Doc. No. 68-8.) The Court afforded an additional thirty
days for the Sanfords to produce these items. (Doc. No. 65.) Yet again, the Sanfords failed to
meet the requirements of the Court’s Orders. (Doc. No. 68 at 18.)
To date, the Sanfords have produced a limited number of documents that were ordered to
be made available by the Court. (Id. at 18-20.) Thus far, they have not made a full disclosure of
their finances. Since the Court and Defendant have been unable to make a determination on their
inability to afford arbitration for more than six months, litigation has stalled. Despite being
given specific instructions to submit these documents, and despite being afforded additional time
to produce these materials, Plaintiffs have been unwilling to comply with the Court’s Orders. In
fact, the Sanfords have supplied only incomplete information about their finances, omitting
current bank and investment statements, property valuations, and complete tax returns as
requested by the Court. The Sanfords’ continued failure to comply with the Court’s Orders
suggests a history of dilatoriness. Therefore, this third Poulis factor weighs in favor of dismissal.
The Sanfords’ Willful or Bad Faith Conduct in Failing
to Comply with Discovery Weighs in Favor of Dismissal
The fourth Poulis factor asks whether the conduct of the party was willful or in bad faith.
Poulis, 747 F.2d at 868.
“Generally, ‘[w]illfulness involves intentional or self-serving
behavior.’” Briscoe v. Klaus, 538 F.3d 252, 263 (3d Cir. 2008) (quoting Poulis, 747 F.2d at 868).
Merely negligent or inadvertent behavior does not rise to the level of willful or bad faith conduct.
See, e.g., Poulis, 747 F.2d at 868-69 (finding that the plaintiff counsel’s behavior was not willful
because, although he had missed deadlines, there was no suggestion that his delays were for any
reason other than his and his wife’s poor health). “When the plaintiff has failed to comply with
instructions of the court directing the plaintiff to take specific actions in this case, the court is
compelled to conclude that the plaintiff’s actions are not accidental or inadvertent but instead
reflect an intentional disregard for th[e] case and the court’s instructions.” Metro Metals USA v.
All-State Diversified Products, Inc., No. 12-1448, 2013 WL 1786593, at *2 (D.N.J. Apr. 25,
The record suggests that the Sanfords acted willfully or in bad faith when failing to
comply with the Court’s Orders to arbitrate and to produce financial documents.
First, from the outset of this litigation the Sanfords have challenged arbitration. Counsel
for Plaintiffs specifically stated that the Sanfords were going to “challeng[e] every step of th[e]
[arbitration] proceeding going forward.” (Doc. No. 68-6 at 14:2-3.) Once ordered to arbitrate,
the Sanfords continued to challenge arbitration, arguing for the first time that they were unable to
afford the expenses associated with the proceeding. (Doc. No. 68 at 12-13.) On March 8, 2016,
counsel stated that the Sanfords “do not agree with projected expenses and wish for me to return
to the Federal Court for further relief there.” (Doc. No. 68-7 at 4.) More than one year later, the
Sanfords continue to challenge the cost of arbitration, yet refuse to submit a complete picture of
their financial circumstances. This is demonstrative of the Sanfords’ general unwillingness to
comply with the Order to arbitrate this dispute and shows that they are not willing to follow the
Court’s directives on producing their financial information.
Second, the Sanfords have failed to comply with the Court’s specific instructions to
produce documents demonstrating their inability to afford arbitration. As previously noted, on
November 30, 2016, the Sanfords were ordered to submit evidence of their finances, including
bank statements, tax returns, property owned, and recovery of the funds in the lawsuit against
Smith. (See Doc. Nos. 56, 58.) Although the Sanfords were given until the end of January 2017
to produce these materials, they did not do so. (Doc. No. 60.) After failing to provide a single
document before the end of January, the Sanfords supplied a few pages of their tax returns from
2014 and 2015, and one deed. To spur compliance with the Court’s instructions, the Court held a
second hearing on February 21, 2017 during which it explained to the Sanfords the importance of
producing these documents to determine their inability to afford arbitration. (Doc. No. 68-8.)
However, the Sanfords yet again failed to comply with the Court’s Orders. 12 To date, the
On May 25, 2017, Counsel for Plaintiffs filed a Motion for Leave to File a Supplement to the
Response in Opposition to Defendant’s Motion to Dismiss. (Doc. No. 74.) This Motion was
not opposed by Defendant. (Doc. No. 75.) Therefore, the Court granted Plaintiffs’ Motion for
Leave to File a Supplement. (Doc. No. 76.) Thus, the record has been supplemented with an
email dated May 25, 2017 from Mary Jo Sanford to counsel for Plaintiffs. (Doc. No. 77.) The
email reads as follows:
I am so sorry for not getting back to you earlier, but we are going to have to ask
for an extension for a few weeks. After a whirlwind of all types of doctors
appointments, MRI’s, X-rays, etc., following about 18 months of back and forth
to determine the problem, Craig [Sanford] just had an emergency hip replacement
this past Friday, May 19th. Now we are busy with therapy and nurses and
followup doctors appointments plus work on top of everything medical that is
going on right now!
We certainly did not plan this  twice I was going to take him to the [emergency
room] as the pain was so severe, so when they said they could schedule the
surgery last week, we had no choice but to get him in because the pain had just
been gradually getting more intense every day for the past several weeks. Please
extend apologies to opposing counsel. I am working on getting additional
doc[ument]s to you, but do need more time. Thank you. Mary Jo.
(Id. at 3.) Although Plaintiffs requested “an extension for a few weeks,” they have had more
than six months to produce the necessary financial documents. (Id.) Though this email may
suggest that the Sanfords did not willfully ignore the Court’s Orders, the record proves the
opposite. On February 21, 2017, Plaintiffs came into Court and were explained the importance
of complying with the Court’s instructions. (Doc. No. 68-8.) Plaintiffs did not raise any
Sanfords have submitted selected tax returns, statements for two bank accounts, and an email
listing four properties they owned. Taken together, this disclosure is inadequate to make a
determination of their inability to afford the costs of arbitration.
Third, and most importantly, the Sanfords’ limited disclosure suggests that they may have
sufficient funds to afford arbitration, and are deliberately hiding this fact from the Court. For
example, “the Sanfords’ tax returns reflect significant interest and dividend income ($386,892 in
2015) and large investment advisory fees ($86,635 in 2015), both of which indicate that [they]
possess substantial investment assets.” (Doc. No. 68 at 19.) In addition, their tax returns
“reference numerous investment accounts . . . such as Voya Insurance and Annuity, Charles
Schwab, Energy Transfer Partners LP, Buckeye Partners LP and Wells Fargo Brokerage
Services.” (Id.) However, the Sanfords have failed to provide any relevant investment account
While the Court does not have a full picture of the Sanfords’ financial
circumstances, it does have information which suggests, contrary to Plaintiffs’ assertion, that the
Sanfords have substantial income-producing assets and investments. Given the inferences drawn
from their limited disclosure, it appears that the Sanfords are refusing to disclose their full
financial situation just to avoid arbitration.
For these reasons, the Court concludes that the fourth Poulis factor assessing Plaintiffs’
willful or bad faith conduct weighs in favor of dismissal.
The Ineffectiveness of Alternative Sanctions Weighs in Favor of Dismissal
The fifth Poulis factor concerns the effectiveness of sanctions other than dismissal.
Poulis, 747 F.2d at 868. One alternative is imposing monetary sanctions on an attorney for
medical issues during that hearing or at any time before. (Id.) In fact, this is the first
indication of medical issue which would delay the discovery deadlines Plaintiffs were
repeatedly given but ignored. Therefore, this email does not change the Court’s conclusion
that the Sanfords have willfully violated the Court’s Orders.
failing to prosecute a case. See Briscoe v. Klaus, 588 F.3d 252, 262 (3d Cir. 2008) (noting that
the district court concluded that “monetary sanctions, including fines, costs, or payment of
attorneys’ fees were unavailable.”). Under the Federal Rules of Civil Procedure, a court is
authorized to impose on an attorney “those expenses, including attorneys’ fees, caused by
unjustified failure to comply with discovery orders or pretrial orders.” Poulis, 747 F.2d at 869
(citing Fed. R. Civ. P. 16(f), 37(a)(4), 37(b), 37(d), and 37(g)). Such a sanction is justified where
the attorney has caused “the delay and noncompliance in the proceedings.” Id.
Conversely, when the delay and noncompliance is caused by the litigant, and not his
attorney, monetary sanctions may not be effective. See Seeley ex rel. Shepard v. Derr, No. 12917, 2014 WL 1024861, at *4 (M.D. Pa. Mar. 14, 2014) (citations omitted) (dismissing the action
and stating that “cases construing Poulis agree that in a situation such as this case, where we are
confronted by a litigant who will not comply with court orders, lesser sanctions may not be
Here, the Court has afforded the Sanfords multiple opportunities to comply with its
Orders; however, for months, they have not done so. This delay does not appear to be caused by
Plaintiffs’ counsel, but by the Sanfords themselves. 13 Counsel conferred with the Sanfords on
For example, counsel for Plaintiffs explain in the Motion for Leave to File a Supplement to the
Response in Opposition to the Motion to Dismiss (Doc. No. 74) that he had been unable to
reach the Sanfords in attempts to confer about filing responsive papers. The Motion states:
On May 25, 2017, the date of this motion, counsel for plaintiffs received an email
from Mrs. Sanford. This email is the first response counsel received from either
Mr. or Mrs. Sanford since attempting to reach them to discuss the issues raised in
the Defendant’s most recently filed motion to dismiss, which remains pending.
(Doc. No. 74 at 5.) In addition, the Motion also notes:
Counsel had been unable to reach the Plaintiffs before filing the responsive papers
and did not seek an additional extension of time because the Court has been
the importance of supplying the relevant financial documents, and requested that the Court hold
a second hearing at which it could impress upon the Sanfords personally the importance of
compliance with the Court’s discovery directives. Because the delay and noncompliance appears
to be caused by the Sanfords, and not their counsel, monetary sanctions on their attorney would
be inappropriate. 14
The Court is mindful that dismissal here is an extreme sanction. Ware v. Rodale Press,
Inc., 322 F.3d 218, 222 (3d Cir. 2003). However, it may “employ the most severe in the
spectrum of sanctions provided . . . to ensure compliance with its discovery orders and to deter
all parties . . . from engaging in discovery misconduct.” Id. For these reasons, this fifth Poulis
factor weighs in favor of dismissal.
The Meritoriousness of Plaintiffs’ Claims Does Not
Weigh in Favor of Dismissal
Finally, the sixth Poulis factor considers the merits of a party’s claims or defenses using
the standard for a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). Huertas v.
City of Phila., No. 02-7955, 2005 WL 226149, at *16 (E.D. Pa. Jan. 26, 2005), aff’d, 139 F.
App’x 444 (3d Cir. 2005). The Federal Rule of Civil Procedure 12(b)(6) motion to dismiss
standard is set forth in Ashcroft v. Iqbal, 556 U.S. 662 (2009), and states that “threadbare recitals
of the elements of a cause of action, supported by mere conclusory statements do not suffice” to
defeat a Rule 12(b)(6) motion to dismiss. Id. at 663; see also Bell Atl. Corp. v. Twombly, 550
U.S. 544 (2007). “To survive a motion to dismiss, a complaint must contain sufficient factual
generous in offering ten (10) days when the first request for an extension was
made. Counsel made efforts to reach Plaintiffs, which were acknowledged in
Mrs. Sanford’s email.
(Id. at 6.) Such effort on counsel’s part shows that any delay and noncompliance is attributed
to the Sanfords.
Defendant does not request attorneys’ fees for Plaintiffs’ delay and noncompliance.
matter, accepted as true, to state a claim to relief that is plausible on its face.” Ethypharm S.A.
France v. Abbott Labs., 707 F.3d 223, 262 n.14 (3d Cir. 2013) (citing Sheridan v. NGK Metals
Corp., 609 F.3d 239, 262 n.27 (3d Cir. 2010)). “A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Id.
The Complaint alleges breach of contract and professional negligence claims arising from
Bracewell’s unsuccessful legal representation of the Sanfords in their attempt to recover a $12.5
million investment with Smith and SCG. (Doc. No. 1.) In particular, the Complaint alleges that
Bracewell was negligent in improperly investigating the whereabouts of the Sanfords’ money,
failing to locate the funds, and declining the file suit against SCG to recoup the investment,
among other lapses in professional standards of legal representation.
(Id. at ¶ 50.)
Complaint also alleges that Bracewell breached the representation agreement “by failing to
exercise the requisite degree of professional skill and knowledge in its representation of Plaintiffs
and by failing to provide legal services both expressly stated and as implied in the . . .
agreement.” (Id. at ¶ 59.) At this stage of the litigation, the Court cannot find that these
allegations, accepted as true, do not state a claim for relief. Further, the Court cannot determine
whether Plaintiffs would be unable to prove these facts at trial. As such, this sixth Poulis factor
weighs against dismissal.
In sum, five of the six Poulis factors weigh in favor of dismissal. However, because the
Court has found that the documentation made available by the Sanfords suggest that they may be
able to afford arbitration, the Court will withhold ruling on Defendant’s Motions to Dismiss
(Doc. Nos. 47, 68) and Plaintiffs’ Motion for Approval of Arbitration Order No. 1 (Doc. No. 48),
and will afford the Sanfords the opportunity to return to arbitration and pay the required fees as
determined by the arbitration panel, including the initial deposit of $2,500 for Arbitrator Crane’s
fees. If Plaintiffs fail to pay the initial deposit of $2,500 and any other required fees by July 18,
2017, Defendant should notify the Court and the Motions to Dismiss (Doc. Nos. 47, 68) will be
granted, and Plaintiffs’ Motion (Doc. No. 48) will be denied. An appropriate Order follows. 15
If Plaintiff pursues the arbitration as required by Court Orders, then the Motions to Dismiss
(Doc. Nos. 47, 68) will be denied. The Motion for Approval of Arbitration Order No. 1 will be
denied as moot.
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