Stooksbury v. Ross et al
MEMORANDUM AND OPINION - Signed by District Judge Thomas A Varlan on 1/30/12. (KMK)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
ROBERT STOOKSBURY, JR.
MICHAEL L. ROSS, et al.,
This is a civil action is before the Court on Plaintiff’s Renewed Motion for Entry of
Default Judgment Against Ross Defendants for Failure to Comply with the Court’s
Memorandum and Order of November 21, 2011 and Failure to File Answer [Doc. 214].
Plaintiff requests, pursuant to Rules 37(b) and 55(b)(2) of the Federal Rules of Civil
Procedure, for an order entering default judgment with respect to liability against those
defendants subject to the Court’s order of November 21, 2011, that is: Michael L. Ross, LTR
Properties, Inc., RPL Properties, Inc., LC Development Company, LLC, Rarity
Communities, Inc., Tellico Lake Properties, L.P., Nickajack Shores Holdings, LLC, Rarity
Corporation, Rarity Club Corporation, Rarity Property Management, Inc., Rarity Ridge Club,
Inc., Rarity Investment Company, LLC, Pine Mountain Properties, LLC, Broadberry
Development Company, LLC, Hiwassee Properties, LLC, RM Company, LLC, LOM
Development Company, LLC, VPI Company, LLC, Rebecca Ross Jordan, and Patricia Ross,
in her personal capacity as personal representative for the Estate of Dale Ross, (collectively,
the “Ross Defendants”).1 The Ross Defendants did not file a response to the motion, and the
time for doing so has passed. See E.D. Tenn. L.R. 7.1(a), 7.2 (providing for the response
time and that “[f]ailure to respond to a motion may be deemed a waiver of any opposition to
the relief sought”).
The Court’s November 21, 2011 order directed the Ross Defendants to comply with
the directives of the June 15, 2011 order entered by Magistrate Judge H. Bruce Guyton
within ten days [Doc. 209].2 The Court warned that “failure to comply may result in the
imposition of further sanctions, including entry of default judgment” [Id.].
In response to the Court’s November 21, 2011 order, the Ross Defendants produced
documents to plaintiff on December 1, 2011, and served plaintiff with new written responses
to plaintiff’s first set of interrogatories and plaintiff’s first set of requests for production of
documents [Docs. 214, 215, 218]. Plaintiff submits these discovery responses “are grossly
incomplete and non-responsive in several material areas” [Doc. 215]. Plaintiff further
submits that “[w]hile some of the requested documents have now been produced, many of
It appears to the Court that three defendants—Michael L. Ross d/b/a Rarity Realty d/b/a
Rarity Pointe Reality, Rarity Management Co., LLC, and Tellico Communities, Inc.—were
inadvertently omitted from the Court’s November 21, 2011 order outlining the “Ross Defendants.”
However, these three defendants were subject to the magistrate judge’s June 15 order, which was
the subject of the November 21, 2011 order, and pursuant to Rule 60(a) of the Federal Rules of Civil
Procedure, the Court corrects this clerical mistake and includes these defendants within the
definition of the “Ross Defendants.”
The Court presumes familiarity with the facts and circumstances underlying the Court’s
November 21, 2011 order [Doc. 209].
the documents most critical to review have not been produced or have only been partially
produced” [Id.]. For illustrative purposes, plaintiff provides the affidavit of Robert H.
Gibson, which outlines that the Ross Defendants have failed to produce federal and/or state
tax returns for several years, that they have failed to produce any financial statements, that
there are several months of missing statements in what bank records they have produced, and
that all of the defendants have failed to produce basic accounting documents, such as general
ledgers [Id.; Doc. 214-1].
Plaintiff also submits the Ross Defendants have attempted to “dodge responsibility
for their dilatory tactics at times by blaming former counsel,” but that the record reflects that
the Ross Defendants had actual, personal knowledge of plaintiff’s discovery requests shortly
after they were served in the fall of 2010 because they signed their initial interrogatory
responses [Doc. 215]. Further, plaintiff submits that in the new written responses, the Ross
Defendants claim “in a vast number of instances” not to have documents in their possession,
but such documents, plaintiff submits, are documents that persons and businesses would be
required to maintain in order to do business, to obtain loans, and to file state and federal
income tax returns [Id.]. Moreover, plaintiff claims the Ross Defendants’ written discovery
responses contain “numerous lengthy objections and hedge language, followed by responses
which were made ‘subject to’ the objections and hedge language,” but the record reflects that
no objections were maintained by counsel for the Ross Defendants during the June 15, 2011
hearing with regard to either plaintiff’s interrogatories or plaintiff’s requests for production
of documents [Id.]. Finally, plaintiff submits that the Ross Defendants have failed to identify
by Bates number any documents produced on August 27, 2010 in the response served on
December 1, 2011, which is “significant” because they previously maintained that they had
produced all available documents responsive to plaintiff’s requests [Id.].
In sum, plaintiff argues that “the record is now clear” that “all of the documents that
were produced on December 1, 2011, [except for a few records produced by LC
Development Company and RPL Properties, LLC,] have not been produced previously,
despite the Ross Defendants’ representations to the contrary” and that “based on the dates
of the documents themselves, the documents produced by the Ross Defendants on December
1, 2011, have been readily available to the Ross Defendants and could have been produced
in a timely manner” [Id.].
Rule 37 Default Judgment
Pursuant to Rule 16(f), when a party fails to obey a scheduling or other pretrial order,
the Court may issue any order authorized by Rule 37(b)(2)(A)(ii) through (vii). Fed. R. Civ.
P. 16(f). Rule 37 authorizes the following orders:
(ii) prohibiting the disobedient party from supporting or opposing designated
claims or defenses, or from introducing designated matters in evidence;
(iii) striking pleadings in whole or in part;
(iv) staying further proceedings until the order is obeyed;
(v) dismissing the action or proceeding in whole or in part;
(vi) rendering a default judgment against the disobedient party; or
(vii) treating as contempt of court the failure to obey any order except an order
to submit to a physical or mental examination.
Fed. R. Civ. P. 37(b)(2)(A). Here, plaintiff specifically requests default judgment.
Rendering default judgment, however, is an “extreme sanction” and should not be imposed
absent “a clear record of delay or contumacious conduct” by the offending party and when
“no alternate sanction would protect the integrity of the pre-trial proceedings.” Davis v. City
of Dearborn, No. 2:09-CV-14892, 2011 WL 1060744, at *1–2 (E.D. Mich. Mar. 23, 2011)
(citations omitted). When a district court uses this extreme sanction, four factors must be
considered: “1) whether the disobedient party acted in willful bad faith; 2) whether the
opposing party suffered prejudice; 3) whether the court warned the disobedient party that
failure to cooperate could result in a default judgment; and 4) whether less drastic sanctions
were imposed or considered.” Grange Mut. Cas. Co. v. Mack, 270 F. App’x 372, 376 (6th
Cir. 2008) (unpublished) (citation omitted); see also Bank One of Cleveland, N.A. v. Abbe,
916 F.2d 1067, 1073 (6th Cir. 1990). Among these factors, bad faith or willfulness is the
most important consideration. Ndabishuriye v. Albert Schweitzer Society, USA, Inc., 136 F.
App’x 795, 800 (6th Cir. 2005).
Regarding the first factor—that is, whether the disobedient party acted in willful bad
faith—the Court has already found the Ross Defendants have engaged in willful bad faith
[See Doc. 209]. The Ross Defendant’s December 1, 2011 discovery responses and
production of documents further supports this conclusion. Despite two orders of the Court
to produce “final and complete” responses and despite representations to the Court that there
were no objections to plaintiff’s discovery requests, [see Doc. 145], the Ross Defendants
failed to produce unobjectionable final and complete responses to the discovery requests.
It also appears that many of the documents not produced, for example, general ledgers and
federal and state tax returns, should be in the possession of the Ross Defendants or their
With respect to the second factor—that is, whether plaintiff has suffered
prejudice—the Court finds it difficult to find plaintiff has not suffered prejudice. This
discovery dispute has been ongoing for over a year and the Ross Defendants have failed to
produce full and complete discovery responses, despite plaintiff’s efforts to obtain the
discovery and Court intervention. Requiring plaintiff to proceed to trial on the issue of
liability without the benefit of all of the requested discovery, including discovery plaintiff
claims is essential to the proof of his claims, would undoubtedly be prejudicial to plaintiff.
Also, the Court’s Scheduling Order dictates a deadline for discovery, which has passed, and
the Court has been clear that it would grant no further continuances in this case; indeed, two
continuances already have been granted.
Regarding the third factor—that is, whether the Ross Defendants have been warned
that default judgment could be entered against them—the record makes clear that the Ross
Defendants have had ample notice that default could be entered for failure to comply with
the orders of the Court. Magistrate Judge Guyton initially recommended granting plaintiff’s
initial request for default judgment for failure to comply with the June 15, 2011 order [Doc.
185]. Although the undersigned did not accept that recommendation, it ordered the Ross
Defendants to pay plaintiff’s attorneys’ fees and expenses and to comply with the June 15,
2011 order, and it expressly stated that “failure to comply may result in the imposition of
further sanctions, including entry of default judgment” [Doc. 209].
Finally, the fourth factor, which requires that the Court consider imposing less drastic
discovery sanctions, weighs in favor of granting default. The Court previously sanctioned
the Ross Defendants by ordering that the Ross Defendants pay reasonable fees and expenses
for failing to comply with the June 15, 2011 order, but provided the Ross Defendants an
opportunity to comply with that discovery order. However, plaintiff’s submissions indicate
that the Ross Defendants did not comply with the Court’s orders, and the Ross Defendants
failed to file any response to the instant motion, which indicates they cannot or desire not to
dispute this point. Further, the Ross Defendants’ failure to respond to plaintiff’s motion
indicates to the Court that lesser sanctions than default would be wholly unavailing.
In sum, although default judgment is an extreme sanction, all considerations indicate
that default judgment should be entered against the Ross Defendants in this case for failing
to comply with the discovery orders of the Court.
Rule 55 Default Judgment
Plaintiff also requests that the Court enter default judgment pursuant to Rule 55(b)(2)
of the Federal Rules of Civil Procedure because the Ross Defendants failed to file an answer
to the amended complaint [Docs. 214, 215]. The Court declines to grant default judgment
on this basis because default was never entered in this case. “Prior to obtaining a default
judgment under either Rule 55(b)(1) or Rule 55(b)(2), there must be an entry of default as
provided by Rule 55(a).” Heard v. Caruso, 351 F. App’x 1, at *15–16 (6th Cir. 2009)
(citation omitted). Rule 55(a) provides that “[w]hen a party against whom a judgment for
affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown
by affidavit or otherwise, the clerk must enter the party’s default.” Fed. R. Civ. P. 55(a).
Because plaintiff did not seek entry of a default from the clerk of the court, it would be
procedurally improper for the Court to grant default pursuant to Rule 55(b)(2).
Plaintiff’s Request for Attorneys’ Fees and Expenses and Other Sanctions
Plaintiff also requests that it be awarded attorneys’ fees and expenses incurred with
respect to reviewing discovery and bringing the renewed motion for default judgment as well
as any other sanctions the Court deems appropriate. The Court notes that, with respect to the
Court’s previous award of attorneys’ fees and expenses, the Ross Defendants objected to
plaintiff’s counsel’s affidavit of fees and expenses and the Court referred the matter to
Magistrate Judge Guyton, which is still pending. The Court accordingly finds it appropriate
to refer this matter to the magistrate judge for his consideration and determination or a report
and recommendation, as may be appropriate.
For the reasons explained herein, the Court finds Plaintiff’s Motion for Entry of
Default Judgment Against Ross Defendants for Failure to Comply with the Court’s
Memorandum and Order of November 21, 2011 and Failure to File an Answer [Doc. 214]
will be GRANTED in part and DENIED in part to the extent stated herein, and plaintiff’s
request for attorneys’ fees and expenses and other sanctions will be REFERRED to the
magistrate judge for his consideration and determination or a report and recommendation,
as may be appropriate. Accordingly, the Court will ORDER that default judgment against
the Ross Defendants be entered in this case on all claims except for those previously
dismissed by the Court [See Doc. 137 (dismissing plaintiff’s claims pursuant to 18 U.S.C.
§ 1962(a) and (b))]. In light of this ruling, the Court also will DENY AS MOOT, with leave
to refile as plaintiff deems appropriate within five days of entry of the order, Plaintiff’s
Motion to Deem Allegations in Amended Complaint Admitted; Motion to Deem All
Defenses Waived by Defendants; and Motion In Limine to Preclude the Introduction of
Evidence Concerning Undisclosed Contentions or Defenses [Doc. 212].
This action will proceed to a jury trial for the purposes of determining damages on
February 21, 2012, at 9:00 a.m. before the undersigned.
s/ Thomas A. Varlan
UNITED STATES DISTRICT JUDGE
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