Atmosphere Hospitality Management, LLC v. Shiba Investments, Inc. et al

Filing 288

MEMORANDUM OPINION AND ORDER denying 269 Motion to Amend; denying 278 Motion for Reconsideration. Signed by U.S. District Judge Karen E. Schreier on 11/9/15. (DJP)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION

ATMOSPHERE HOSPITALITY
MANAGEMENT, LLC,
Plaintiff,
vs.
SHIBA INVESTMENTS, INC.,
KARIM MERALI, and
ZELJKA CURTULLO,

5:13-CV-05040-KES

MEMORANDUM OPINION AND
ORDER DENYING MOTION TO
AMEND DEFENDANTS’ ANSWER TO
ATMOSPHERE’S REQUEST FOR
ADMISSION AND DENYING MOTION
FOR RECONSIDERATION

Defendants.

Defendants, Shiba Investments, Inc., Karim Merali, and Zeljka Curtullo,
move this court under Federal Rule of Civil Procedure 36(b) for leave to file an
amended response to plaintiff Atmosphere Hospitality Management, LLC’s
requests for admission. Docket 269. Defendants also move the court under
Federal Rule of Civil Procedure 60(b), seeking relief from the court’s July 29,
2015 order imposing sanctions. Docket 278.1 Atmosphere resists the motions.
For the following reasons, the court denies the motions.
BACKGROUND
Atmosphere brought this action against Shiba and Merali to resolve
issues related to a licensing contract and management contract between the
parties that allowed Shiba to operate a hotel it owned under Atmosphere’s
Defendants also requested oral argument pursuant to D.S.D. Civ. LR
7.1. Docket 278 at 1. Because the court can resolve the pending motions
without oral argument, defendants’ request is denied.
1

brand, “Adoba.” On September 6, 2013, Atmosphere moved for a preliminary
injunction to enjoin defendants from using the Adoba brand and processes
associated with the brand and further asked the court to order Shiba to pay all
debts owed to vendors incurred during the operation of the hotel. Docket 27.
Hearings were held on the preliminary injunction motion in October of 2013.
Karim was called to testify at the preliminary injunction hearings.
Defendants introduced a number of exhibits into evidence, including what was
labeled as “Exhibit Y.” See Docket 86 at 93 (transcript of proceeding). Exhibit Y
consisted of two pages. The first page was a screenshot of an email allegedly
sent from Karim to James Henderson, carbon copied to “Sacha,” on
December 31, 2011, at 4:59 p.m. Karim’s email address is depicted as
“[e-mail].” The text of the email portrayed in the screenshot
reads: “Jim, Attached is the license Agreement… Please review and let me know
if ok as per our discussions late last night. I will work on the management
contract tomorrow as it is getting ready for NY Eve Celebration.” The
screenshot also shows a file attachment that reads “ADOBALicenseAgreementFinal.docx (53.5 KB).” The second page of Exhibit Y is a print out of the text of
the December 31, 2011 email. At the top of the second page is a header
indicating that the email was forwarded from “[e-mail]” to former
defense counsel, Courtney Clayborne,2 on October 27, 2013, at 1:00 p.m.
Clayborne asked Karim about Exhibit Y. That testimony is as follows:

On June 5, 2015, this court found Clayborne was likely to be a material
witness in the matter and disqualified him from further representing
defendants. Docket 255.
2

2

Q:

I’m now going to show you Exhibit Y and ask you if you can
tell me what Exhibit Y is?

A:

This is an email I sent to Jim Henderson.

Q:

And Exhibit Y is – is two pages. The front page appears to be
what appears on the computer screen and the second is the
actual email?

A:

Yes.

Q:

And Exhibit Y was sent on Saturday, December 31, at 4:59
p.m.?

A:

Correct.

Q:

From you to Mr. Henderson?

A:

And a copy to Sacha.

Id.
On December 18, 2013, this court found that Atmosphere had not met
its burden of showing that defendants should be enjoined from operating the
hotel using the Adoba brand and processes while this action was pending.
Docket 53.3 One of Atmosphere’s theories was that defendants fraudulently
induced Atmosphere to enter the licensing agreement and that the agreement
should therefore be rescinded. This court applied the factors laid out in
Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 724 (8th Cir. 1981), and found
that Atmosphere was not likely to succeed on the merits of that claim. The
court cited Exhibit Y as “show[ing] the parties were negotiating the terms of the

3 The court concluded that the parties’ management contract
unambiguously required Shiba to bear responsibility for all debts owed to
vendors during operation of the hotel and therefore ordered Shiba to pay such
debts and to refrain from informing vendors that Atmosphere was responsible
for payment.

3

contract as of December 30, 2011, and also show[ing that] Atmosphere had
access to the final version prior to and immediately after signing it.” Id. at 9-10.
Exhibit Y, in conjunction with other evidence, suggested that even if
Atmosphere was fraudulently induced to enter the contract, Atmosphere either
did not act to rescind the contracts promptly or neglected its legal duty to read
the contracts before signing them.
Subsequently, numerous discovery disputes arose between the parties.
Atmosphere moved to compel discovery that, among other things, related to
Exhibit Y. For example, Atmosphere’s first set of discovery requests was served
on March 28, 2014, and included several requests for production. See Docket
100-1. Request for production number 2 stated:
Please produce a copy of all communications in hard copy and
electronic format, including email, text messages and attachments,
whether personal or business, by Defendants, its attorneys and/or
its employees, including but not limited to emails between, to, or
from Karim Merali, Sacha Merali, Mehdi Merali, Zeljka Curtilo,
Batool Merali and/or their attorney(s) regarding the Adoba brand,
Atmosphere, Jim Henderson, Adrienne Pumphrey, the agreements
between the parties to this litigation, the operation and/or
management of the Adoba hotel in Rapid City, the renovations of
the hotel to the Adoba brand, the use of the Adoba brand, the
intentions of the parties in their relations, any negotiations, and
the finances of both Adoba and Atmosphere. This request is not
asking for communications solely between a client and its/his/her
attorney.
Id. at 4. And request for production number 5 stated:
For each such email produced in response to Request for
Production Nos. 2, 3 and 4, please provide a copy of the
corresponding .pst file, a print-out of the email listed amongst the
other emails in the Sent box sent on the same day as the email
produced, a print-out of the email listed amongst other emails in
the Inbox or other folder received on the same day as the email
produced, a print out of all metadata for each email produced, and
4

all emails saved and produced in their native format on a CD. This
request requires this information even for emails that may have
been previously produced.
Id. at 5.
Prior to the filing of Atmosphere’s motion to compel, the parties met and
conferred. Among other issues, the parties agreed that information related to
Exhibit Y would be turned over. Docket 100-5 at 3.4 Specifically, Atmosphere
expressed its belief that the December 31, 2011 email was never sent and that
the correlating “.pst” file information sought by its RFP number 5 was of
particular importance. Id.
On September 29, 2014, this court compelled complete responses to
most, but not all, of Atmosphere’s discovery requests, including RFP numbers
2 and 5. Docket 169 (transcript). The court set deadlines for the information to
be turned over. The court also ordered that the parties meet and agree on a
date for Atmosphere’s expert, Dan Meinke, to inspect Karim’s computer for
forensic analysis in relation to RFP number 5. Id. at 25-26. Meinke conducted
his analysis over the course of the next several months. See Docket 199-9
(Meinke’s report). Meinke was able to locate two identical images of the email
on Karim’s computer but opined that “no proof exists that the email in question
on Exhibit Y and the two emails found on [Karim’s computer] ever successfully
reached [Jim Henderson] on December 31, 2011.” Id. at 4.

This docket entry is a letter from Atmosphere summarizing the meeting
wherein Atmosphere asked defendants’ counsel to respond with any
disagreements to the summary. No response was given.
4

5

On October 13, 2014, Atmosphere moved for attorneys’ fees and
sanctions and argued that it had not received complete discovery responses
from defendants even though the court’s deadline had passed. Docket 147;
Docket 150. On January 9, 2015, the court granted Atmosphere’s motion for
attorney’s fees and ordered further briefing on the issue of sanctions.5 Docket
173. As part of that order, the court determined that most, but not all, of
defendants’ discovery responses were incomplete. Additionally, the court
cautioned:
Defendants should also explain what steps they have taken to
correct the insufficient discovery responses. In determining
sanctions, the court will consider, among other factors, whether
defendants have remedied their failure to comply with the court’s
order on the motion to compel. If defendants have not complied in
full with the court’s order [by January 30, 2015], the court will
consider imposing any and all sanctions authorized under Rule 37,
up to and including dismissal of the third-party complaint or entry
of a default judgment.
Id. at 14-15.
On January 15, 2015, Atmosphere received a response regarding its
third set of discovery requests signed by Karim. Docket 184-2. That set of
discovery included the following request for admission:
48. Admit that your Exhibit Y introduced at the preliminary
injunction hearing was never emailed to James Henderson.
RESPONSE: Admit. I believe it was hand delivered.

5 Defendants did not brief the sanctions issue at all, instead asserting
that they had complied with the court’s order within the correct number of
days. The court explained that the rule defendants purported to rely on to
calculate the due date “does not exist,” and determined that, with one
exception, each of defendants’ late-filed responses were inadequate. See Docket
173.

6

Id. at 2. Another response dated February 12, 2015, included the same
admission. Docket 219-22 at 10.
On July 29, 2015, this court ruled on Atmosphere’s motion for sanctions.
Docket 258. The court found that defendants had not remedied their
incomplete discovery responses. Additionally, the court determined that
defendants’ conduct was willful and that defendants acted in bad faith. Thus,
the court dismissed defendants’ third-party complaint and counterclaims as
appropriate sanctions.
Regarding the finding of bad faith, the court observed that it had relied
on defendants’ Exhibit Y in its order denying Atmosphere’s preliminary
injunction motion. Id. at 9. Additionally, the court found that defendants never
produced the email and correlating data that Atmosphere sought in its RFPs
that were compelled by the court. The court also noted Meinke’s report and his
belief that the December 31, 2011 email was never sent, as well as defendants’
January 15, 2015 response to Atmosphere’s request for admission number 48
concerning Exhibit Y. Regarding that admission, the court found:
Obviously, Atmosphere sought an admission to whether the
communication portrayed in the exhibit, not the physical exhibit
itself, was ever emailed to James Henderson. Notably, the
signature on this response is dated January 15, 2015.
Docket 184-2 at 3. Thus, six days had elapsed since this court
warned defendants that sanctions would be forthcoming if they did
not fully and completely remedy their inadequate discovery
responses. Whether or not Merali intended this response to be a
poorly conceived and incredulous answer to Atmosphere’s request
for admission, the court will take Merali at his word: The email was
never sent.
Id. at 10. Thus, the court concluded that:
7

at its worst, defendants’ conduct demonstrates that it has
committed fraud on this court. At best, and construing Merali’s
admission as a flippant retort (in spite of this court’s order for
defendants to fully satisfy their discovery obligations), the court
finds that such a response shows the type of bad faith sufficient to
warrant the harshest sanctions available under Rule 37.
Id. at 23.
I.

Defendants’ Motion to Amend Their Response to Atmosphere’s
Request for Admission
LEGAL STANDARD
Rule 36(b) of the Federal Rules of Civil Procedure governs a party’s

request to withdraw or amend an admission. That rule provides that “[a] matter
admitted under this rule is conclusively established unless the court, on
motion, permits the admission to be withdrawn or amended.” Fed. R. Civ. P.
36(b). The rule further explains that:
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.
Id. Thus, the rule directs a court to consider two inquiries: (1) the effect on the
litigation; and (2) prejudice to the non-moving party. F.D.I.C. v. Prusia, 18 F.3d
637, 640 (8th Cir. 1994) (quoting Mid Valley Bank v. N. Valley Bank, 764 F.
Supp. 1377, 1391 (E.D. Cal. 1991)). “Although an admission should ordinarily
be binding on the party who made it, there must be room in rare cases for a
different result, as when an admission no longer is true because of changed
circumstances or through honest error a party has made an improvident
admission.” 11 Charles Alan Wright & Arthur R. Miller, Federal Practice &

8

Procedure § 2264 (3d ed.) (hereinafter Wright & Miller). A court’s decision to
permit or deny the amendment of an admission is reviewed for an abuse of
discretion. Prusia, 18 F.3d at 640; see also Gutting v. Falstaff Brewing Corp.,
710 F.2d 1309, 1312-13 (8th Cir. 1983).
Under the first prong of Rule 36(b), the court should consider whether
permitting the amendment would promote presentation of the merits of the
action. Prusia, 18 F.3d at 640. In Prusia, the Eighth Circuit looked to Davis v.
Noufal, 142 F.R.D. 258 (D.D.C. 1992) and Rabil v. Swafford, 128 F.R.D. 1, 2
(D.D.C. 1989) to explain that if an “inaccurate admission” was to “completely
preclude consideration of the merits,” then allowing the amendment to be made
would promote the presentation of the merits of the action. Id. (summarizing
Davis); Rabil, 128 F.R.D. at 2 (noting that “[t]he subject matter of these
admissions all reach the merits of the case as their admission would effectively
preclude the defendant's case.”); see also Conlon v. United States, 474 F.3d
616, 622 (9th Cir. 2007) (explaining the first inquiry is met “when upholding
the admissions would practically eliminate any presentation of the merits of
the case.”) (quotation omitted); Perez v. Miami-Dade Cty., 297 F.3d 1255, 1266
(11th Cir. 2002) (same).
Under the second prong, the court’s inquiry is focused on “ ‘the difficulty
a party may face in proving its case’ because of the sudden need to obtain
evidence required to prove the matter that had been admitted.” Prusia, 18 F.3d
at 640 (quoting Gutting, 710 F.2d at 1314). Thus, mere inconvenience or “[t]he
necessity of having to convince the trier of fact of the truth of a matter
9

erroneously admitted is not sufficient.” Id. (citations omitted). Rather, prejudice
is demonstrated by the difficulties a party would face at trial such as “the
unavailability of key witnesses[.]” Conlon, 474 F.3d at 623.
DISCUSSION
Defendants seek leave to amend their response to Atmosphere’s request
for admission number 48. That request, and defendants’ response to it, is as
follows:
48. Admit that your Exhibit Y introduced at the preliminary
injunction hearing was never emailed to James Henderson.
RESPONSE: Admit. I believe it was hand delivered.
Docket 184-2 at 2. Defendants’ amended response would read:
Defendants qualify their response on the following basis. The
actual “your Exhibit Y” was an exhibit created or prepared by their
previous counsel, Mr. Clayborne, on or near the date of the
preliminary injunction hearing, which first commenced October 24,
2013 – almost one year and ten months after the actual e-mail in
dispute was written and transmitted. On behalf of Defendants, Mr.
Clayborne admitted the matter requested because he believed it to
specifically reference the actual exhibit, which was a “screenshot”
from his computer, made for the hearing, of an image of the
December 31, 2011 e-mail from Karim Merali to James Henderson.
(Admittedly, page two of that exhibit is a copy of the e-mail
forwarded to Mr. Clayborne by Karim on October 27, 2013.) Based
on that understanding, Defendants admit that the actual exhibit
created by Mr. Clayborne for the hearing was not transmitted by
e-mail to James Henderson. Defendants deny that the actual e-mail
in dispute – the one dated December 31, 2011 from Karim Merali to
James Henderson – “was never emailed to James Henderson.” In
fact, Defendants assert that such e-mail was transmitted by Karim
Merali to James Henderson with a cc: to Sacha Merali. Defendants
have produced a report (along with supporting documentation and
data) by Mr. John Burckhard of Black Hills Technologies that
substantiates their position that the actual e-mail in dispute was
transmitted by e-mail to James Henderson.

10

Docket 270 at 2-3 (emphasis in original).
The purpose of defendants’ motion is to make their response to
Atmosphere’s request for admission correspond to Karim’s testimony during
the preliminary injunction hearing. During that hearing, Karim agreed with
Clayborne that “Exhibit Y was sent on Saturday, December 31, at 4:59 p.m.”
Docket 86 at 93.
Beginning with the second prong of the court’s analysis, the court finds
that Atmosphere has not demonstrated sufficient prejudice. Part of
Atmosphere’s argument stems from the fact that it has already filed several
dispositive motions that are pending before the court. But “preparing a
summary judgment motion in reliance upon an erroneous admission does not
constitute prejudice.” Prusia, 18 F.3d at 640. The remainder of Atmosphere’s
argument concerns the difficulty it would face responding to the statements
contained in the admission. The prejudice prong, however, is not satisfied by a
showing of difficulty in responding to the admission alone, but rather by
showing that Atmosphere “will be unable to produce evidence” in response to
defendants’ amended position at trial. Gutting, 710 F.2d at 1314. Likewise,
prejudice is not shown by inconvenience or the need for additional time to
gather evidence. Prusia, 18 F.3d at 640. Here, Atmosphere has an expert who
can rebut defendants’ contention that the email was in fact sent. Thus,
Atmosphere has not met its burden to show prejudice.
Turning to the first factor, both parties take generalized positions. For
example, defendants contend that “[t]he issue of whether that email was
11

transmitted is crucial, going to the merits of the case” without any elaboration.
Docket 270 at 5. Atmosphere responds primarily by noting that additional time
would be needed to depose Merali, Clayborne, or others. Docket 277 at 6-7.
The court agrees with defendants that, for example, whether the email was sent
would be relevant to Atmosphere’s claims for breach of contract or fraud in the
inducement. But whether the email was sent would not necessarily result in an
automatic resolution of Atmosphere’s claims in its favor. And whether the email
was sent would likely not be relevant to Atmosphere’s claim of defamation.
Cases analyzing the sufficiency of this factor suggest that the admission
should effectively resolve a dispute if the admission is allowed to stand. Cf.
Prusia, 18 F.3d at 640 (explaining that “[b]ecause allowing the erroneous
admission to stand might have barred the FDIC’s claim, permitting the
amendment would have subserved the presentation of the merits.”); Conlon,
474 F.3d at 622 (finding that “upholding the deemed admissions eliminated
any need for a presentation on the merits, [therefore] Conlon satisfies the first
prong of the test in Rule 36(b).”); Perez, 297 F.3d at 1266 (observing “the items
the court had deemed admitted conclusively established the liability of both
defendants[.]”); Davis, 142 F.R.D. at 259 (noting “[d]efendants’ requested
admissions negated all of plaintiff’s allegations.”). Defendants have not made
such a showing.
Even if defendants had satisfied both prongs, the final inquiry is whether
the court will exercise its discretion to permit the amended admission.
Rule 36(b) provides that a court “may” permit withdrawal or amendment of an
12

admission if the two-factor analysis is met. Courts analyzing this issue have
explained that “[b]ecause the language of the Rule is permissive, the court is
not required to make an exception to Rule 36 even if both the merits and
prejudice issues cut in favor of the party seeking exception to the rule.”
Donovan v. Carls Drug Co., Inc., 703 F.2d 650, 652 (2d Cir. 1983); see also In re
Carney, 258 F.3d 415, 419 (5th Cir. 2001) (“Even when these two factors are
established, a district court still has discretion to deny a request for leave to
withdraw or amend an admission.”); Conlon, 474 F.3d at 624 (“We have not
previously opined on whether Rule 36(b) requires a district court to grant relief
when the moving party can satisfy the two-pronged test. We hold that it does
not.”); United States v. Kasuboski, 834 F.2d 1345, 1350 n.7 (7th Cir. 1987)
(explaining that “Rule 36(b) allows withdrawal of admissions if certain
conditions are met and the district court, it its discretion, permits the
withdrawal.”).
Generally, a court should not focus on the moving party’s excuse for
making an erroneous admission. Prusia, 18 F.3d at 640. In this case, however,
defendants’ proposed amended admission contains an excuse. That is,
defendants assert that attorney Clayborne believed that Atmosphere’s request
sought an admission that the physical exhibit, rather than the email it
depicted, was never sent to Henderson. In their brief, defendants explain:
The amended response was prepared by the undersigned counsel
after an in-person conference with Defendants’ previous counsel,
Mr. Clayborne. Mr. Clayborne explained that he answered the
request as he did because he truly believed that it was requesting
whether “your Exhibit Y” was ever sent to James Henderson by
13

email. He further explained how he created Exhibit Y by making a
“screenshot” from his office computer of the email forwarded to
him by Mr. Merali – the subject December 31, 2011 email.
Hopefully, the details stated above in the amended response
explain sufficiently the basis for how the original admission was
made.
Docket 270 at 3 (emphasis in original). But it was Karim and not Clayborne
who signed the request for admission – so it is Karim’s understanding of his
answer that matters and not Clayborne’s. Fed. R. Civ. P. 36(a). And even if
Clayborne’s understanding mattered, defendants have not produced an
affidavit or a signed statement from Clayborne that states that his
understanding of the request for admission was as defendants now present it.
Also, regarding the report of John Burckhard, his report consists of a
page and a half of his findings. Docket 267-2. The report is not signed,
Burckhard has not been noticed or designated as an expert, and defendants
have not produced Burckhard’s curriculum vitae that are all required by Rule
26(a)(2)(B) as if he were serving as an expert. Defendants acknowledge these
facts and contend that Burckhard is simply acting as a “consultant,” even
though defendants are attempting to use Burckhard’s report to refute issues
raised by Atmosphere’s expert Dan Meinke. See Docket 287 at 7.
Moreover, defendants’ contention that the request for admission asked
about the physical Exhibit Y and not about the email attached to the exhibit is
incredible. The phrasing of the request mirrored Clayborne’s question at the
preliminary injunction hearing. Compare Docket 86 at 93 (“And Exhibit Y was
sent on Saturday, December 31, at 4:59 p.m.?”) with Docket 184-2 at 2 (“Admit
that your Exhibit Y introduced at the preliminary injunction hearing was never
14

emailed to James Henderson.”). During the hearing, neither Karim nor
Clayborne had any difficulty comprehending that Exhibit Y was the tangible
surrogate for the intangible email. And unlike a spontaneous answer elicited by
a question at trial, a party responding to a request for admission has time to
contemplate the matter in order to formulate an appropriate and accurate
response, a response that ultimately reflects their conscious choice. Thus, no
plausible reading of Atmosphere’s request for admission would suggest that
Atmosphere was asking about when the exhibit itself was delivered to
Henderson instead of whether Karim actually sent the email to Henderson.
As this court noted in its July 29, 2015 order imposing sanctions, the
signature on defendants’ response to this admission was dated January 15,
2015. Docket 258 at 10. That signature date was merely six days after this
court warned defendants that sanctions would be forthcoming if they did not
fully comply with the court’s orders. While that warning was given in
conjunction with defendants’ failure to respond to Atmosphere’s first set of
discovery requests, it behooved defendants to ensure that all of their discovery
responses were fully formed, adequately presented, and completed in good
faith.6 Therefore, the court concludes it will not permit defendants to amend
their response to Atmosphere’s request for admission.
II.

Defendants’ Motion for Reconsideration
LEGAL STANDARD

The court also observed that defendants failed to produce any of the
data correlating with the email as sought by Atmosphere in its requests for
production.
6

15

Rule 60(b)(1) of the Federal Rules of Civil Procedure allows a court to
relieve a party from a final judgment, order, or proceeding due to “mistake,
inadvertence, surprise, or excusable neglect[.]” Fed. R. Civ. P. 60(b)(1). The rule
is grounded in equity and it “is to be given a liberal construction so as to do
substantial justice and ‘prevent the judgment from becoming a vehicle of
injustice.’ ” MIF Realty L.P. v. Rochester Assocs., 92 F.3d 752, 755 (8th Cir.
1996) (quoting Rosebud Sioux Tribe v. A & P Steel, Inc., 733 F.2d 509, 515 (8th
Cir. 1984)). Its purpose is “to preserve the delicate balance between the
sanctity of final judgments . . . and the incessant command of a court's
conscience that justice be done in light of all the facts.” Id. At the same time,
“[r]elief under Rule 60(b) is an extraordinary remedy that lies within the
discretion of the trial court.” Hunter v. Underwood, 362 F.3d 468, 475 (8th Cir.
2004) (quoting In re Design Classics, Inc., 788 F.2d 1384, 1386 (8th Cir. 1986)).
“Thus, relief will not be granted under Rule 60(b)(1) merely because a party is
unhappy with the judgment. The party must make some showing justifying the
failure to avoid the mistake or inadvertence.” Wright & Miller § 2858.
Consequently, “[r]eversal of a district court’s denial of a Rule 60(b) motion is
rare because Rule 60(b) authorizes relief in only the most exceptional of cases.”
Noah v. Bond Cold Storage, 408 F.3d 1043, 1045 (8th Cir. 2005) (quoting Int’l
Bhd. of Elec. Workers v. Hope Elec. Corp., 293 F.3d 409, 415 (8th Cir. 2002)).
In Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380,
382-83 (1993), the Supreme Court addressed whether a bankruptcy creditor’s
failure to meet a filing deadline constituted “excusable neglect.” While the
16

Court analyzed the “excusable neglect” language contained within Bankruptcy
Rule 9006(b)(1), it also examined the phrase as it appeared within several of
the Federal Rules of Civil Procedure. Id. at 391-92. In the specific context of
Rule 60(b), the Court concluded that the rule’s “neglect” language
“encompasse[d] situations in which the failure to comply with a filing deadline
is attributable to negligence.” Id. at 394. With respect to whether a party’s
neglect is “excusable,” the Court identified a number of factors to consider,
such as “the danger of prejudice to the [other party], the length of the delay
and its potential impact on judicial proceedings, the reason for the delay,
including whether it was within the reasonable control of the movant, and
whether the movant acted in good faith.” Id. at 395. The Eighth Circuit has
regularly applied the factors identified in the Pioneer decision to subsequent
“excusable neglect” cases. See, e.g., Union Pac. R. Co. v. Progress Rail Servs.
Corp., 256 F.3d 781, 783 (8th Cir. 2001); Feeney v. A T & E, Inc., 472 F.3d 560,
563 (8th Cir. 2006). Also, the Eighth Circuit has “concluded ‘the existence of a
meritorious defense continues to be a relevant factor’ ” in Rule 60(b) cases.
Union Pac. R. Co., 256 F.3d at 783 (citing Johnson v. Dayton Elec. Mfg. Co., 140
F.3d 781, 784 (8th Cir. 1998)).
DISCUSSION
A.

Whether Defendants’ Actions Constituted “Neglect?”

The first inquiry identified by the Court in Pioneer is a determination of
whether a party’s conduct constitutes “neglect,” which the Court equated with
carelessness or negligence. Pioneer, 507 U.S. at 394. But if a party’s conduct is
17

intentional, the Eighth Circuit Court of Appeals has found the neglect is not
excusable. See, e.g., Johnson, 140 F.3d at 784 (“Our cases have consistently
sought to distinguish between contumacious or intentional delay or disregard
for deadlines and procedural rules, and a ‘marginal failure’ to meet pleading or
other deadlines. We have rarely, if ever, excused the former.”) (citing cases); see
also Eskridge v. Cook Cty., 577 F.3d 806, 810 (7th Cir. 2009) (noting the
deliberate choice to litigate in state rather than federal court was not “neglect”
under Rule 60(b)(1)); Latshaw v. Trainer Wortham & Co., Inc., 452 F.3d 1097,
1101 (9th Cir. 2006) (observing that parties are bound by their intentional acts
which cannot serve as a basis for relief under Rule 60(b)(1)).
This court’s order for sanctions found that defendants engaged in willful
misconduct. Docket 258 at 21-22 (“Rather, defendants have once again
willfully violated the court’s orders.”). The court also found that defendants
engaged in bad faith. Id. at 23 (“At best . . . the court finds that such a
response shows the type of bad faith sufficient to warrant the harshest of
sanctions.”). In Johnson, the Eighth Circuit expressed hesitation with equating
conduct that is willful with conduct that is intentional. Johnson, 140 F.3d at
784-85 (explaining that “ ‘willful’ is too ambiguous a term” and concluding the
movant’s conduct “was not contumacious, it did not exhibit an intentional
flouting or disregard of the court and its procedures[.]”). Here, however,
defendants had several chances to remedy their inadequate discovery
responses and repeatedly failed to do. And the court warned defendants that
sanctions would be forthcoming if they did not comply with the court’s orders
18

in full. Docket 173 at 14. It was only when defendants again failed to comply
with the court’s order in spite of that warning that the court imposed the
sanctions defendants are now asking this court to reconsider. Docket 258.
While a conclusion that defendants’ conduct was intentional is supported by
the record, the court will assume for purposes of this motion only that their
actions were merely neglectful.
B.

Whether Defendants’ Conduct is “Excusable?”
1.

The Pioneer equitable factors

Under Pioneer, the next inquiry is whether the neglect is “excusable” and
that depends on balancing the Pioneer equitable factors. Pioneer, 567 U.S. at
395. Defendants do not explicitly analyze any of the Pioneer factors that the
court must consider or explain how those factors should weigh in their favor.
Rather, defendants’ brief is focused primarily on laying the blame for the
court’s sanctions at the feet of their former counsel, Courtney Clayborne.
Nonetheless, the court will attempt to construe defendants’ arguments as
addressing the Pioneer factors where applicable.
i.

Reason for the Neglect

The Eighth Circuit has stated that the party’s reason for its neglect is
“[t]he most important factor in the analysis[.]” See, e.g., Feeney, 472 F.3d at
563; Gibbons v. United States, 317 F.3d 852, 854 (8th Cir. 2003) (quoting
Lowry v. McDonnell Douglas Corp., 211 F.3d 457, 463 (8th Cir. 2000) (noting
the Pioneer factors do not carry equal weight); but see Union Pac. R. Co., 256
F.3d at 783 (faulting the district court for focusing exclusively on the party’s
19

reason for its mistake). “While prejudice, length of delay, and good faith might
have more relevance in a closer case, the reason-for-delay factor will always be
critical to the inquiry.” Gibbons, 317 F.3d at 854 (quoting Lowry, 211 F.3d at
463).7 But if a party’s reason for its neglect is not satisfactory, “relief may be
required where other equitable considerations weigh strongly in favor of
[granting relief].” Feeney, 472 F.3d at 563.
Defendants primarily assert that their former counsel, attorney
Clayborne, is to blame for their neglect. They devote several pages of their brief
chronicling instances of Clayborne’s conduct which, according to defendants,
demonstrate his “neglect, disregard, and disobedience” in this proceeding.
Docket 279 at 6-10. Also, defendants offer several narrative statements from
Karim, Sacha, Zeljka, and other individuals in support of their arguments. See
Docket 268. Among other things, these narratives contain numerous
allegations impugning Clayborne’s representation as well as descriptions of
conversations that allegedly took place between Clayborne and the providers of
the statements. Nearly all of these proffered narratives, however, are unsworn,
self-serving in content, and hearsay in form.
Regardless of the admissibility of these narratives, they also contain
allegations that are internally inconsistent or simply contradicted by the
record. For example, Karim contends that “[n]o one recalls ever seeing
The Gibbons and Lowry cases involved Fed. R. App. P. 4(a)(5), which
allows a court to extend the time to file a notice of appeal if the moving party
demonstrates “excusable neglect or good cause,” and the Eighth Circuit applied
the Pioneer factors in both decisions. See Gibbons, 317 F.3d at 853-54; Lowry,
211 F.3d at 462.
7

20

[Atmosphere’s] first set of Discovery.” Docket 268-2 at 3. In the same
paragraph, however, Karim recalls answering Atmosphere’s requests for
admissions and signing typed responses to the discovery inquiries. Karim is
identified as the individual answering Atmosphere’s first set of discovery in May
of 2014, although the document is unsigned. Docket 100-2. In fact, Karim did
sign supplemental responses to Atmosphere’s first set of discovery requests on
October 14, 2014, and January 27, 2015. Docket 164-1; Docket 199-1.
Also, Karim acknowledges in the unsworn statement that he would ask
Clayborne to object to information sought by Atmosphere despite his nowclaimed ignorance of what Atmosphere requested. Compare Docket 100-1 at 6
(Request for Production No. 23) (“Produce all Native American employee payroll
records from 2004-2012 and employee files to match these records.”) and id.
(Request for Production No. 24) (“Produce all payments made to foreign workers
from 2004-2012 and employee files to match these records.”) with
Docket 268-2 at 3 (“At times, I would ask him to object due to the enormous
requirement of discovery of items or because of the invasion of privacy on the
people. For example, to submit all employee records from 2004 to 2013 broken
down by foreigners, Native Americans.”). Zeljka Curtullo also acknowledges
conversing with Karim about Atmosphere’s discovery requests. Docket 268-5 at
3. Thus, the veracity of defendants’ allegations in these narratives is
questionable at best.
Regarding defendants’ argument that attorney Clayborne is to blame, the
Eighth Circuit has held that attorney ignorance or carelessness is generally not
21

the type of neglect held to be excusable under Rule 60(b)(1). Noah, 408 F.3d at
1045 (citing cases). The court has observed that “[l]itigants choose counsel at
their peril.” Inman v. Am. Home Furniture Placement, Inc., 120 F.3d 117, 118
(8th Cir. 1997). As the Supreme Court held in Pioneer,
Petitioner 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.’
Pioneer, 507 U.S. at 397 (quoting Link v. Wabash R. Co., 370 U.S. 626, 633-34
(1962)). Thus, the Eighth Circuit has stated that a party’s recourse is not
through Rule 60(b) but through a legal malpractice action. Inman, 120 F.3d at
118.
Illustratively, the Eighth Circuit has found that an attorney’s illness is
not an excusable justification for missing an appeal deadline, Gibbons, 317
F.3d at 855, that an attorney’s busy schedule was not sufficient to warrant
relief from the dismissal of a complaint, Noah, 408 F.3d at 1045, and that the
failure to check or adequately make arrangements to check mail is an
insufficient reason for missing a summary judgment deadline. Feeney, 472
F.3d at 563. More analogous to this case, the Eighth Circuit has also held that
an attorney’s failure to follow the clear dictates of a court order is not
excusable neglect. In re Guidant Corp., 496 F.3d 863, 867-67 (8th Cir. 2007);
Ceridian Corp. v. SCSC Corp., 212 F.3d 398, 404 (8th Cir. 2000). In Guidant
Corp., the court observed:
22

[The plaintiffs] did not provide the court with a current email
address, a completed fact sheet, or a signed medical disclosure
form by the required deadline. Counsel was notified at least three
times that he had failed to comply with the orders. Upon each
notice, Counsel submitted incomplete answers to questions on the
district court's mandated fact sheet. Eventually, Guidant moved to
dismiss the [plaintiffs’] claims.
Guidant Corp., 496 F.3d at 866. Finding that the district court did not abuse its
discretion when it dismissed the plaintiffs’ request for relief, the Eighth Circuit
explained that “[t]hese errors epitomize the type of professional carelessness
that we have held does not warrant relief under Rule 60(b).” Id. at 868.
Here, the court granted Atmosphere’s motion to compel on
September 29, 2014, and ordered certain information be timely produced and
turned over by defendants. See Docket 169 (transcript of proceedings). When
most of that information was not turned over on time by the defendants,
Atmosphere moved for attorneys’ fees and sanctions. Docket 147; Docket 150.
This court granted Atmosphere’s request for attorneys’ fees but ordered further
briefing on the issue of sanctions because defendants did not address the
issue. Docket 173. The court warned defendants that if they did not comply
with the court’s order in full by January 30, 2015, “the court will consider
imposing any and all sanctions authorized under Rule 37, up to and including
dismissal of the third-party complaint or entry of a default judgment.” Id. at
14-15. Defendants did serve supplemental responses, including Karim’s signed
supplemental response dated January 27, 2015. But Atmosphere objected and
contended the supplemental responses still did not fully comply with this
court’s earlier order granting the motion to compel. This court agreed with
23

Atmosphere and concluded the responses were still inadequate and imposed
the sanctions defendants now ask this court to reconsider. Docket 258. Thus,
as in Guidant Corp., this court notified defendants several times of their
inadequate discovery responses and, in spite of the warning that sanctions
would be forthcoming if those inadequacies were not timely cured, defendants
failed to follow the clear dictates of the court’s orders. Although defendants
wish to place all the blame on their former attorney for their failure to comply
with this court’s orders, that is not a sufficient justification warranting relief
under Rule 60(b)(1). See, e.g., Guidant Corp., 496 F.3d at 868; Noah, 408 F.3d
at 1045. Thus, this factor weighs strongly against defendants’ request for relief.
ii.

Good Faith

The good faith factor focuses on the intent of the neglecting party and its
attempt (if any) to comply with the court’s order. Cf. Guidant Corp., 496 F.3d at
867 (finding a lack of good faith when the defaulting party had three
opportunities over several months to comply with court orders but failed to do
so). This court has already determined that defendants’ non-compliance with
the court’s orders was conducted in bad faith and that their bad faith was
relevant to the sanctions the court imposed. Docket 258 at 23.
Defendants correctly observe that the court’s imposition of sanctions was
not predicated on their future compliance with the court’s orders. Rather,
whether defendants subsequently complied with the court’s orders would be a
relevant consideration to any future sanctions that might be imposed. Docket
238 at 26 (“If the defendants once again have not complied in full with the
24

court’s order at that time, the court will consider imposing any and all
sanctions justified under Rule 37, including entry of a default judgment.”)
(emphasis in original). While defendants assert that they have worked diligently
to comply with the court’s order since the court imposed sanctions, the fact
that they may now finally have complied with their discovery obligations after
being sanctioned does not transform their bad faith into good faith. So, the
court finds that this factor weighs against defendants’ claim for relief.
iii.

Danger of Prejudice to Atmosphere

When ruling on a Rule 60(b) motion, a court must “also consider whether
any substantial rights of the nonmoving party have been prejudiced.” MIF
Realty L.P, 92 F.3d at 756 (citing Hoover v. Valley West D.M., 823 F.2d 227,
230 (8th Cir. 1987)). The Eighth Circuit has stated that “prejudice may not be
found from delay alone or from the fact that the defaulting party will be
permitted to defend on the merits.” Johnson, 140 F.3d at 785. Rather,
prejudice requires a showing “such as ‘loss of evidence, increased difficulties in
discovery, or greater opportunities for fraud and collusion.’ ” Id. (quoting
Berthelsen v. Kane, 907 F.2d 617, 621 (6th Cir. 1990)); see also Stephenson v.
El-Batrawi, 524 F.3d 907, 915 (8th Cir. 2008) (concluding that the increased
difficulty of conducting discovery and re-litigating claims after a default had
been entered several years ago constituted sufficient prejudice).
This case is now over two years old and the discovery deadline has long
passed. Docket 121 (ordering discovery deadline of January 2, 2015). Several
dispositive motions are now pending. And the court’s July 29, 2015 order
25

dismissed several motions for summary judgment related to defendants’ thirdparty complaint and counterclaims as moot. Docket 258 at 26. The briefs filed
by Atmosphere related to defendants’ third-party complaint and counterclaims
were filed without Atmosphere’s knowledge of the additional information that
defendants assert they have now turned over and without Atmosphere’s ability
to depose the individuals relevant to the information recently disclosed by
defendants. As the court observed before, “Atmosphere’s discovery requests
touch on virtually every claim relevant to this case.” Id. at 23. Thus, the
undisclosed information was not limited in its relevance to defendants’ thirdparty complaint and counterclaims. Rather, it was relevant to Atmosphere’s
claims as well. And the court not only noted the increased time and effort that
Atmosphere was required to expend in order to pursue discoverable
information generally, but also that “Atmosphere’s ability to discover
information related to the third-party complaint and counterclaims and to
defend itself in this matter has been impeded by defendants’ misconduct.” Id.
at 24. Given the added delay, expenses, and discovery difficulties that have
already occurred and may occur again by reinstating defendants’ third-party
complaint and counterclaims, the court finds that Atmosphere would be
sufficiently prejudiced for this factor to weigh against granting defendants’
claim for relief.
iv.

Length of Delay

Assessing this factor requires the court to consider not only the length of
a party’s non-compliance, but also the impact of that non-compliance on
26

judicial proceedings. Guidant Corp., 496 F.3d at 867. Atmosphere’s first set of
discovery responses was served upon defendants on March 28, 2014. See
Docket 100-1. By the time the court’s order imposing sanctions was issued on
July 29, 2015, over sixteen months had passed since Atmosphere’s discovery
requests were first served. Defendants contend that as of August 20, 2015,
they were in compliance with the court’s order. Assuming that to be true, the
length of defendants’ delay in fully responding to Atmosphere’s discovery
request was nearly seventeen months. Alternatively, if the court measured the
length of the delay from the date of the court’s September 29, 2014 order
granting Atmosphere’s motion to compel, the length of delay would still be
nearly eleven months.
In Union Pacific R. Co., 256 F.3d at 782, Progress Rail filed a motion to
set aside a default judgment entered against it because it had failed to respond
to Union Pacific’s complaint. The Eighth Circuit stated that Progress Rail
sought relief “less than six months after Union Pacific filed its complaint.” Id. at
783. The court described this period as a “short-term delay” and saw “no
reason to think that providing relief to Progress Rail would disrupt the judicial
process in any measurable way.” Id. In Guidant Corp., 496 F.3d at 867, the
plaintiffs did not submit the documentation ordered by the court until six
months after its deadline. The Eighth Circuit noted that “[i]n some
circumstances, such a delay might be insignificant,” but because the case
involved multidistrict litigation, the court found that “the delay also impacted
the nearly 1,400 other plaintiffs by unfairly diverting the time and attention of
27

the court away from their claims to that of the [plaintiffs].” Id. In an
unpublished opinion, the Ninth Circuit agreed with a district court’s conclusion
that an eleven month delay weighed against the movant’s request for relief
under Rule 60(b)(1). Minns v. Peake, 466 F. App’x 619, 620 (9th Cir. 2012)
(unpublished).
The court finds that the length of defendants’ delay, even giving them the
more favorable measurement of nearly eleven months, is significant. While that
delay may not have impacted the judicial process generally, it has impacted the
efficient administration of this proceeding specifically. As this court previously
observed, it relied on Karim’s representations made in an October 2013 hearing
regarding the email allegedly sent from Karim to James Henderson on
December 31, 2011, when it denied Atmosphere’s request for a preliminary
injunction. Docket 258 at 9, 28. But based on Merali’s supplemental discovery
responses, the court had reason to believe that the email was not in fact ever
sent. Id. at 28. The court found that “at its worst, defendants’ conduct
demonstrates that it has committed fraud on this court.” Id. Now, nearing the
end of 2015, defendants claim that the supplemental discovery response was
“simply a misunderstanding, mistake, inadvertence or excusable neglect” and
that they can prove “with 100% certainty” that the email was sent (a claim
Atmosphere strongly disputes). Docket 279 at 5-6. It was exactly this type of
oscillating answer and defendants’ inability to provide a single, coherent
response over an extended period of time to Atmosphere’s discovery request–in
spite of the court’s order that defendants do so–that warranted the sanctions
28

the court imposed. Moreover, to reinstate defendants’ third-party complaint
and counterclaims now would result in additional delay and more discovery
related to the information defendants recently turned over–discovery that
should have been ended almost a year ago. Thus, the court finds that this
factor weighs against defendants’ claim for relief.
v.

Meritorious Defense or Claim

In the typical case discussing this factor, the moving party missed a
deadline and the court has entered a default or otherwise unopposed ruling in
favor of the other party. See, e.g., Johnson, 140 F.3d at 783 (party failed to
answer a complaint which resulted in entry of a default); Feeney, 472 F.3d at
562 (party failed to respond to a summary judgment motion which resulted in
summary judgment for the other party). In order to analyze this factor, the
court looks at what the party should have filed on time to determine if it could
establish a meritorious defense to the motion that was granted. Cf. Johnson,
140 F.3d at 785 (defaulting party provided an affidavit opining that the
defaulting party may not be liable on a products liability claim). The court’s
inquiry is whether a party’s “proffered evidence ‘would permit a finding for the
defaulting party[.]’ ” Id. (quoting Augusta Fiberglass Coatings, Inc. v. Fodor
Contracting Corp., 843 F.2d 808, 812 (4th Cir. 1988)). The moving party must
provide at least “minimally adequate factual support to illustrate the potential
viability of his asserted defenses” for purposes of this factor. Stephenson, 524
F.3d at 914. Because defendants seek reinstatement of their third-party
complaint and counterclaims, the court will use these standards to determine if
29

defendants have asserted a meritorious claim rather than a meritorious
defense.
Defendants’ third-party complaint asserted claims for breach of contract,
tortious interference with a business expectancy, and conversion. The
complaint and its claims for relief was accompanied by numerous factual
assertions that laid out defendants’ theories. Those claims were reasserted as
counterclaims in Shiba and Merali’s answer to Atmosphere’s amended
complaint. Curtullo did not assert any claims of her own.
As with the other factors, defendants do not address this factor or
otherwise explain how their dismissed claims were meritorious. Rather, the
bulk of their brief suggests a potential claim against Clayborne. The court’s
earlier dismissal of defendants’ claims was not related to any determination
that the claims were meritless. For purposes of this motion, the court will
assume defendants’ dismissed claims were supported by enough factual
information to warrant a finding that their claims were meritorious. Thus, this
factor weighs in favor of granting defendants’ request for relief.
2.

Balancing the factors

As the Eighth Circuit has explained, the reason-for-neglect factor is
critical. Gibbons, 317 F.3d at 854. Defendants’ proffered reason–attorney error
or carelessness–weighs heavily against granting them relief. See, e.g., Guidant
Corp., 496 F.3d at 868; Noah, 408 F.3d at 1045. The court has determined that
defendants acted in bad faith, that the length of their delay was significant,
and that Atmosphere would be prejudiced by granting defendants’ claim for
30

relief. The court assumes that the meritorious claim factor weighs in
defendants’ favor. On balance, the court finds that the Pioneer factors do not
support granting defendants’ request for relief under Rule 60(b)(1). Thus, their
request is denied.
C.

Rule 60(b)(6)

Defendants argue in the alternative that they should be entitled to relief
under Rule 60(b)(6). That rule serves as a catch-all and authorizes a court to
relieve a party from a judgment or order based on “any other reason that
justifies relief.” Fed. R. Civ. P. 60(b)(6). A party must, however, demonstrate
that “exceptional circumstances” support their claim. Harley v. Zoesch, 413
F.3d 866, 871 (8th Cir. 2005).
Defendants’ reliance on 60(b)(6) is problematic for several reasons. First,
defendants’ asserted reason justifying relief under Rule 60(b)(6) is the same as
their claim for relief under Rule 60(b)(1). That is, defendants blame the
disobedience of their former counsel for inadequately handling their case that
resulted in the court’s order of sanctions. But the Supreme Court has made
clear that a party cannot pursue the same grounds for relief under Rule
60(b)(1)and (b)(6). See Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847,
863 (1988) (“Rule 60(b)(6) . . . grants federal courts broad authority to relieve a
party from a final judgment . . . provided that the motion is made within a
reasonable time and is not premised on one of the grounds for relief
enumerated in clauses (b)(1) through (b)(5).). The Court explained that
In Klapprott v. United States, 335 U.S. 601, 613 (1949), we held
that a party may ‘not avail himself of the broad “any other reason”
31

clause of 60(b)’ if his motion is based on grounds specified in
clause (1)—‘mistake, inadvertence, surprise or excusable neglect.’
Rather, ‘extraordinary circumstances’ are required to bring the
motion within the ‘other reason’ language and to prevent clause (6)
from being used to circumvent the 1–year limitations period that
applies to clause (1).
Id. at n.11. Thus, defendants cannot avoid their inadequate showing of
excusable neglect by arguing that the same set of facts should constitute
extraordinary circumstances.
Second, in Pioneer, the Court observed that
To justify relief under subsection (6), a party must show
‘exceptional circumstances’ suggesting that the party is faultless in
the delay. If a party is partly to blame for the delay, relief must be
sought . . . under subsection (1) and the party’s neglect must be
excusable.
Pioneer, 507 U.S. at 393 (emphasis added). Defendants’ unsworn and selfserving narratives that are offered to shift the blame entirely off of themselves
and entirely on to Clayborne are not persuasive. Moreover, there are a number
of instances in the record demonstrating, for example, that Karim was aware of
and participated in formulating defendants’ inadequate discovery responses.
See Docket 100-1; Docket 164-1; Docket 199-1. Thus, defendants are not
faultless and are limited to pursuing their claim for relief under Rule 60(b)(1).
Because the court has already rejected their argument under that provision,
the court likewise rejects the argument here.
These defects aside, defendants have not made an adequate showing of
exceptional circumstances. The Eighth Circuit has held that attorney error,
even error amounting to “gross negligence” as defendants label Clayborne’s

32

representation, is not the kind of “extraordinary circumstances” that justifies
relief under Rule 60(b)(6). Heim v. C.I.R., 872 F.2d 245, 248 (8th Cir. 1989). In
Heim, Laura, Clarence, and Elmer Heim were represented by counsel in an
action before the United States Tax Court. Their attorney submitted the
disputed issues to the court for resolution on stipulated facts. When the court
ruled against the Heims, the attorney failed to apprise them of the adverse
ruling and allowed the statutory window for filing an appeal to close. Id. at 246.
Through new counsel, the Heims sought leave to file motions to vacate the
adverse ruling and argued that their former attorney “was grossly negligent in
handling the matter before the tax court.” Id. The court denied the motion to
vacate, and the Eighth Circuit affirmed.
On appeal, the Eighth Circuit noted that the Heims brought their claim
for relief based on Rule 60(b)(1) for “excusable neglect” and under Rule 60(b)(6)
for “any other reason justifying relief.” Id. at 247 n.2. Although the court did
not parse the claims in the manner described by the Supreme Court in
Liljeberg, the Eighth Circuit explained:
Thus, the Heims’ argument here is essentially directed toward the
adequacy of the representation that they received. We have
‘generally held that neither ignorance nor carelessness on the part
of an attorney will provide grounds for Rule 60(b) relief.’ . . . We
therefore conclude that any errors committed by [the Heims’
attorney], even accepting the designation of gross negligence, do
not constitute an adequate showing of ‘extraordinary
circumstances,’ [thus] warranting vacation of the tax court
decision.
Id. at 247-48 (internal citations omitted). Although the Heims “[had] a
legitimate ground for complaint” against their former attorney, that was not
33

sufficient to show the tax court abused its discretion refusing to vacate its prior
ruling. Id. at 249. Thus, even if the court ignores that defendants are asserting
the same claim for relief under Rule 60(b)(1) and (b)(6) in contravention of
Liljeberg, and if the court further ignores that defendants are not themselves
faultless in contravention of Pioneer, and if the court still further accepts
defendants’ position that Clayborne was grossly negligent, then pursuant to
Heim they are still not entitled to relief under Rule 60(b)(6).
Defendants attempt to avoid this conclusion by relying on Mann v. Lewis,
108 F.3d 145 (8th Cir. 1997), where the Eighth Circuit held:
Mann himself did not engage in any intentional or willfully
disobedient conduct designed to delay the proceedings or frustrate
the defendants' preparations for trial. Rather, the failure to comply
was due solely to [his attorney’s] lack of diligence. Under the facts
of this case, Mann should not be made to shoulder such a grave
consequence—the total extinction of his claim—for [his attorney’s]
dereliction.
Id. at 147-48. But Mann involved an appeal from the district court’s dismissal
of a complaint with prejudice under Rule 41(b) and not a request under
Rule 60(b) to reconsider the imposition of sanctions for repeated discovery
violations. And unlike in Mann, the defendants here are not blameless. Thus,
Mann is distinguishable.
Lastly, defendants attempt to rely on cases arising out of habeas corpus
jurisprudence where the petitioners were wholly or almost entirely abandoned
by their counsel. Docket 279 at 14 (citing Holland v. Florida, 560 U.S. 631
(2010) and Maples v. Thomas, 132 S. Ct. 912 (2012)). Although defendants
refer several times to the court’s order of sanctions as an imposition of the
34

“death penalty,” id. at 3; Docket 278 at 1, the court disagrees that the
reconsideration of civil sanctions is analogous to setting aside a sentence of
death. Moreover, whatever similarities could be drawn between the intricacies
of habeas corpus proceedings and the present case, defendants were not
abandoned by Clayborne. Rather, Clayborne represented defendants in this
matter for over two years by filing numerous motions and briefs and appearing
on their behalf until the day this court disqualified him. Contra Holland, 560
U.S. at 652 (finding the attorney not only failed to file a habeas petition but
also “failed to communicate with his client over a period of years, despite
various pleas from Holland that [the attorney] respond to his letters.”); contra
Maples, 132 S. Ct. at 916-17 (noting counsel left their law firm for new
employment without informing the petitioner, notifying the court, or requesting
a change of address which left the petitioner completely abandoned).
Defendants have actively participated in this proceeding and only began to
complain about their now disqualified attorney’s performance after their claims
were extinguished. And, as the court has already noted, defendants’ allegations
are presented in an unsworn format and are largely self-serving. Thus, the
court concludes that defendants are not entitled to relief under Rule 60(b)(6).
CONCLUSION
Defendants will not be permitted to amend their response to
Atmosphere’s request for admission pursuant to Rule 36(b). Even if defendants’
conduct was not intentional, the court finds that the balance of the Pioneer
equitable factors do not warrant granting defendants relief under Rule 60(b)(1).
35

The court also finds that defendants are not entitled to relief under Rule
60(b)(6). Thus, it is
ORDERED that defendants’ motion to amend their response to
Atmosphere’s request for admission (Docket 269) is denied.
IT IS FURTHER ORDERED that defendants’ motion for reconsideration
(Docket 278) is denied.
9
Dated November ___, 2015.

BY THE COURT:

/s/ Karen E. Schreier
KAREN E. SCHREIER
UNITED STATES DISTRICT JUDGE

36