ECIMOS, LLC et al v. Nordyne, LLC et al

Filing 253

ORDER granting 244 motion for leave to supplement; granting in part and denying in part 238 motion to enforce settlement agreement; granting 224 motion for reconsideration; granting in part and denying in part 247 renewed motion to dismiss; and denying as moot 231 motion for stay and denying as moot 249 countermotion for stay. Signed by Judge Samuel H. Mays, Jr on 08/11/2017. (Mays, Samuel)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION

ECIMOS, LLC; and ELECTRICAL
CONTROLS, INC.;

)
)
)
Plaintiffs,
)
)
v.
)
)
NORTEK GLOBAL HVAC LLC; LOGICAL )
SYSTEMS, INC.; LOGICAL SYSTEMS, )
LLC; GAIL WAYNE ROANE; and MI)
CHAEL GRAY,
)
)
Defendants.
)
)

No. 2:14-cv-02703-SHM

ORDER

Before the Court are six motions.

First, on September 13,

2016, Charles M. Weirich, Jr. (“Weirich”) filed a motion asking
the Court to reconsider a June 2016 award of sanctions against
Weirich and Daniel Frederick Peel (“Peel”) based on their conduct as counsel for Plaintiffs ECIMOS, LLC (“ECIMOS”) and Electrical Controls, Inc. (“EC”).

(Mot. of Pls.’ Attorney to Revise

Order to Remove Award of Sanctions Against Pls.’ Attorneys and
Supporting Mem. of Law, ECF No. 224 (“Reconsideration Mot.”).)
Defendants

Nortek

Global

HVAC

LLC

(“Nortek

Global”);

Logical

Systems, Inc. (“LSI”); Logical Systems, LLC (“LSL”); Gail Wayne
Roane (“Roane”); and Michael Gray (“Gray”) (collectively, “De-

fendants”) 1 filed a response to the Reconsideration Motion on
September 20, 2016.

(Defs.’ Resp. to Mot. of Pls.’ Attorney to

Revise Order to Remove Award of Sanctions Against Pls.’ Attorneys, ECF No. 229 (“Reconsideration Resp.”).)

On September 26,

2016, Magistrate Judge Diane Vescovo filed her report and recommendation addressing the Reconsideration Motion.

(R. & R. on

Pl.’s Mot. to Reconsider Order on Mot. to Dismiss, ECF No. 230
(“Reconsideration Report”).)

No parties objected to the Recon-

sideration Report, and the time to do so has passed.

(Id. at 6

(setting deadline for objections).)
Second,

on

September

27,

2016,

Plaintiffs,

Weirich,

and

Peel filed a motion asking the Court to stay an order compelling
payment of the June 2016 sanctions award.

(Motion to Stay Order

Compelling Payment of Sanctions and Supporting Mem., ECF No. 231
(“Stay Mot.”).)

The same day, Defendants and former Defendant

Tesluk filed a response to the Stay Motion.

(Resp. of Pls.’

[sic] to Mot. to Stay Order Compelling Payment of Sanctions, ECF
No. 233 (“Stay Resp.”).)

1

Plaintiffs’ claims against Defendant David Tesluk (“Tesluk”)
were dismissed in this Court’s order dated June 15, 2016. (Order 12, ECF No. 195 (“June 2016 Order”).) He is no longer a defendant, but has a pending counterclaim and an unpaid award of
sanctions. (See Answer of David Tesluk to Third Am. Compl., and
Counter-Compl. of David Tesluk Against ECIMOS, LLC, and Electrical Controls, Inc. 20–22, ECF No. 55; Order Awarding Attorney
Fees and Expenses to the Defs. 20, ECF No. 208 (“Fee Order”).)
2

The third and fourth motions before the Court are interrelated.

On October 4, 2016, Defendants and Tesluk filed a motion

asking the Court to enforce a settlement agreement purportedly
reached

by

the

parties.

(Defs.’

Mot.

to

Enforce

Settlement

Agreement, ECF No. 238 (“Settlement-Enforcement Mot.”); see also
Defs.’ Mem. in Supp. of Mot. to Enforce Settlement Agreement,
ECF No. 238-1 (“Settlement-Enforcement Mem.”).)

On October 26,

2016, Stephen Olita, the principal of both Plaintiffs, emailed
to the Court a pro se response (the “Olita Response”) to the
Settlement-Enforcement Motion.

On February 7, 2017, Plaintiffs,

represented by new counsel, submitted a motion asking for leave
to supplement the Olita Response.

(Mot. and Supporting Mem. for

Leave to Suppl. Resp. to Stephen G. Olita’s Resp. to Def.’s Mot.
to Enforce Settlement Agreement, ECF No. 244 (“Leave-to-Suppl.
Mot.”).)

Attached to the Leave-to-Supplement Motion is a pro-

posed supplemental
tion.
to

to

the

Settlement-Enforcement

Mo-

(Suppl. Resp. to Stephen G. Olita’s Resp. to Defs.’ Mot

Enforce

Settlement

Enforcement
Tesluk

response

filed

Resp.”).)
an

Agreement,
On

opposition

ECF

February
to

the

No.

17,

244-1

2017,

(“Settlement-

Defendants

Leave-to-Supplement

and

Motion

that responded to the Leave-to-Supplement Motion and the Settlement-Enforcement Response.

(Defs. Opp’n to Pls.’ Mot. for Leave

to Suppl. Resp. to Stephen G. Olita’s Resp. to Defs.’ Mot. to

3

Enforce

Settlement

Agreement,

ECF

No.

245

(“Leave-to-Suppl.

Opp’n”).)
The fifth and sixth motions before the Court are also interrelated.

On March 31, 2017, Defendants and Tesluk filed a

motion asking the Court to (1) enforce the purported settlement
agreement

and

dismiss

this

action,

or

(2) dismiss this action with prejudice.
Mot.

to

Dismiss

Mot.”). 2)

and

for

in

the

alternative,

Sanctions,

(Defs.’ Second Renewed
ECF

No.

247

(“Dismissal

On April 14, 2017, Plaintiffs filed a response to the

Dismissal Motion.

(Pls.’ Resp. to Defs.’ Second Renewed Mot. to

Dismiss and for Sanctions and Counter-Mot. to Stay Proceedings
Pending the Court’s Ruling on Defs.’ Mot. to Enforce Settlement
Agreement, ECF No. 249 (“Dismissal Resp.”).)

The Dismissal Re-

sponse included a “countermotion” asking the Court to stay these
proceedings until the Court rules on the Settlement-Enforcement
Motion (“Stay Countermotion”).

(Id. at 3.)

On April 24, 2017,

Defendants and Tesluk filed a document serving as a reply in
support of the Dismissal Motion and as a response to the Stay
Countermotion.

(Defs.’ Reply in Supp. of Second Renewed Motion

to Dismiss and for Sanctions, ECF No. 252 (“Dismissal Reply”).)
For
Motion

the
is

reasons

GRANTED

discussed

and

the

below,

the

Leave-to-Supplement

Settlement-Enforcement

2

Motion

is

Defendants and Tesluk filed identical documents at ECF Nos. 247
and 248. The document at ECF No. 248 is stricken.
4

GRANTED in part and DENIED in part.

The Reconsideration Motion

is GRANTED, and the sanctions levied against Weirich and Peel in
the

June

2016

Order

are

stricken.

GRANTED in part and DENIED in part.
WITH PREJUDICE.

The

Dismissal

Motion

is

This action is DISMISSED

The Stay Countermotion and the Stay Motion are

DENIED as moot.
I.

BACKGROUND
The history of this matter has been recounted in, inter

alia, (1) Section I of Magistrate Judge Vescovo’s report and
recommendation addressing a motion to dismiss filed by Defendants and Tesluk in September 2015, and (2) Section I of the June
2016 Order.

(R. & R. on Defs.’ Mot. to Dismiss and Order Grant-

ing Defs.’ Mot. to Strike the Pls.’ Suppl. Resp. and Order Denying Pls.’ Mot. for Leave to File DVDs and Order Denying Defs.’
Mot. for Leave to File Notice of Additional Deficiencies 3–25,
ECF No. 183 (“March 2016 Report”); June 2016 Order 3–5.)

The

following background section addresses subsequent proceedings.
On July 15, 2016, Defendants filed a “renewed” motion to
dismiss based on “continued discovery deficiencies” by Plaintiffs.

(Defs.’ Renewed Mot. to Dismiss Based on Pls.’ Continued

Discovery Deficiencies or, Alternatively, Mot. for Extension of
Time 1, ECF No. 197 (“July 2016 Mot. to Dismiss”).)

Defendants

complained of discovery deficiencies after the March 2016 Report,

specifically,

that

between
5

March

2016

and

July

2016,

Plaintiffs had done nothing to address their outstanding discovery deficiencies.

(See, e.g., id. at 2–6.)

dismissal as a discovery sanction.

Defendants sought

(See, e.g., id. at 6–7.)

The Court referred the July 2016 Motion to Dismiss to Magistrate
Judge Vescovo.

(Order of Reference, ECF No. 207.)

On July 22, 2016, Magistrate Judge Vescovo issued an order
awarding Defendants and Tesluk certain attorney fees and expenses pursuant to the June 2016 Order.

(See generally Fee Order.)

The June 2016 Order had ordered Plaintiffs, Weirich, and Peel to
pay attorney fees to Defendants and Tesluk as a sanction.
2016 Order 12–16.)

(June

After entering the June 2016 Order, the

Court referred to Magistrate Judge Vescovo various objections
Plaintiffs had made to the requested amount of attorney fees.
(See Objs. of Pls. and Pls.’ Counsel to Amount of Attorneys’
Fees Requested in Affidavits of Defense Counsel, ECF No. 181;
Order of Reference, ECF No. 196.)
objections.

The Fee Order addressed those

(See generally Fee Order.)

The Fee Order required

Plaintiffs to pay Defendants and Tesluk $53,902.98, and required
Weirich and Peel to pay Defendants and Tesluk $51,223.38.
at 20–21.)

(Id.

The payments were due “within twenty-eight days” ––

i.e., by August 19, 2016.

(Id. at 20.)

On July 29, 2016, Plaintiffs filed a response to the July
2016 Motion to Dismiss.

(Pls.’ Resp. to Defs.’ Renewed Mot. to

Dismiss or Alternatively, Mot. for Extension of Time, ECF No.
6

210.)

On August 24, 2016, Plaintiffs, Weirich, and Peel filed a

document expressing various objections to the Fee Order.

(Objs.

of Pls. and Pls.’ Counsel to Order Awarding Attorney Fees and
Expenses to the Defs., ECF No. 215 (“Fee-Order Objs.”).)

On Au-

gust 29, 2016, Defendants filed a reply in support of the July
2016 Motion to Dismiss.

(Defs.’ Reply in Supp. of their Renewed

Mot. to Dismiss Based on Pls.’ Continued Discovery Deficiencies
or, Alternatively, Mot. for Extension of Time, ECF No. 216.)
On August 30, 2016, Defendants filed a motion asking the
Court to compel Plaintiffs and Plaintiffs’ Counsel to comply
with the Fee Order.

(Defs.’ Notice and Mot. to Compel Compli-

ance with the Court’s Order, ECF No. 217 (“Mot. to Compel Compliance”).)

The Motion to Compel Compliance represented that

“Plaintiffs and their counsel have failed to comply with [the
Fee Order],” and asked the Court to compel the ordered payments.
(Id. at 1.)

The Court referred the Motion to Compel Compliance

to Magistrate Judge Vescovo.

(Order of Reference, ECF No. 220.)

On September 13, 2016, Weirich filed the Reconsideration
Motion.

The Court referred the Reconsideration Motion to Magis-

trate Judge Vescovo on September 15, 2016.
ECF No. 225.)

(Order of Reference,

The same day, Plaintiffs filed a response to the

Motion to Compel Compliance.

(Pls.’ Resp. to Defs.’ Notice and

Mot. to Compel Compliance with the Court’s Order, ECF No. 226
(“Mot. to Compel Compliance Resp.”).)
7

On September 19, 2016, Magistrate Judge Vescovo granted the
Motion to Compel Compliance.

(Order Granting Defs.’ Mot. to

Compel Pls.’ Compliance with the Ct.’s Order, ECF No. 227 (“Order Granting Mot. to Compel Compliance”).)

Plaintiffs, Weirich,

and Peel had argued that the Fee Order was not a final order and
that, until it was final, paying the sanctions award was unnecessary.
Judge

(See Mot. to Compel Compliance Resp. 2–3.)

Vescovo

rejected

that

argument

and

ordered

Magistrate
Plaintiffs,

Weirich, and Peel to pay the sanctions award within seven days,
by September 26, 2016.

(Order Granting Mot. to Compel. 4–5.)

On September 26, 2016, Magistrate Judge Vescovo filed the
Reconsideration Report.

It recommends that the Court deny the

Reconsideration Motion “to the extent [it] seeks revision of the
[March 2016 Report] but that the Court reconsider [the June 2016
Order] if [the Court had] failed to consider” Plaintiffs’ objections to the March 2016 Report.

(Id. at 2.)

Weirich and Peel filed the Stay Motion on September 27,
2016.

The Stay Motion represents that the parties have “reached

an agreement for the resolution of all claims, counterclaims,
and sanctions awards.”

(Stay Mot. ¶ 1.)

The gravamen of the

motion is that, because the settlement agreement has resolved
the sanctions award, enforcing the award is unnecessary.
same day, the parties filed a Notice of Settlement.
232.)

Plaintiffs also filed the Stay Response.
8

The

(ECF No.

On October 4, 2016, Defendants and Tesluk filed the Settlement-Enforcement Motion.
the

September

2016

That motion recounts the history of

settlement

negotiations.

(Settlement-

Enforcement Mot. ¶¶ 1–7; see also Settlement-Enforcement Mem. 2–
6.)

According to Defendants and Tesluk, the parties reached a

binding settlement agreement verbally on Friday, September 23,
2016, “with the understanding that the settlement would be further

reduced

to

a

more

detailed

writing

(Settlement-Enforcement Mot. ¶ 1.)

over

the

weekend.”

Following negotiations over

the weekend and on the following Monday, “[a]t 3:00 pm on Monday, September 26, 2016, [Weirich] sent counsel for Defendants
an email communicating Plaintiffs’ acceptance of the final draft
of the settlement agreement.”

(Id. ¶ 3.)

On September 27 and

28, however, Weirich and Peel “advised Defendants that [Stephen
Olita] had not signed the agreed upon [Written Settlement Agreement

(“WSA”)],

and

was

calls or text messages.”
September

29,

not

returning

(Id. ¶ 4.)

“Plaintiffs’

counsel

[Weirich’s

and

Peel’s]

Late in the afternoon on
notified

Defendants . . .

that [Olita] was no longer willing to sign the [WSA].”
¶ 7.)

(Id.

The Settlement-Enforcement Motion asks the Court to “find

that the [WSA] is binding upon all Parties”; “[d]ismiss this
case, with prejudice”; and “[a]ward Defendants their attorney
fees and costs incurred since Monday, September 26, 2016, including

those

incurred

with

respect
9

to”

the

Settlement-

Enforcement Motion, “as a sanction for Plaintiffs’ and Mr. Olita’s conduct.”

(Id. ¶ 9(a)–(c).)

The same day that Defendants and Tesluk filed the Settlement-Enforcement Motion, Weirich and Peel filed motions to withdraw as Plaintiffs’ counsel.

(Charles M. Weirich, Jr.’s Am.

Mot. to Withdraw as Counsel for Pls. and Supp. Mem. of Law, ECF
No. 236 (“Weirich Withdrawal Mot.”); Daniel F.B. Peel’s Motion
to Withdraw as Counsel for Pls. and Supp. Mem. of Law, ECF No.
237 (“Peel Withdrawal Mot.”).)

On October 12, 2016, the Court

entered an order that, inter alia, granted the withdrawal motions.

(Order 8–11, ECF No. 239 (“October 2016 Order”).)

The

order also instructed Plaintiffs to respond to the SettlementEnforcement Motion within fourteen days.

(Id. at 1, 11–12.)

On October 26, 2016, Olita sent the Court an email with numerous attachments, including the Olita Response.

(Email from

Stephen Olita, ECIMOS, LLC, to Hon. Samuel H. Mays, Jr. (Oct.
26,

2016)

239.pdf”).)

(attachment

titled

“ECIMOS

Response

to

ORDER

On November 9, 2016, Defendants and Tesluk filed a

Notice Regarding Motion to Enforce Settlement Agreement.
No. 240.)

DOC

(ECF

The notice states that Defendants and Tesluk received

the Olita Response and argues that the Court should grant the
Settlement-Enforcement Motion.

(See generally id.)

On December 27, 2016, three attorneys with Bateman Gibson,
LLC, filed notices of appearance seeking to represent Plain10

tiffs.

(Notice of Appearance, ECF No. 241 (appearance of J.

O’Neal Perryman); Notice of Appearance, ECF No. 242 (appearance
of Ralph T. Gibson); Notice of Appearance, ECF No. 243 (appearance of Everett B. Gibson).)

On February 7, 2017, Plaintiffs,

through their new counsel, filed the Leave-to-Supplement Motion
and the accompanying Settlement-Enforcement Response.

The gra-

vamen of the Settlement-Enforcement Response is that Weirich and
Peel pursued their own interests, not Plaintiffs’, when negotiating

the

Settlement

Enforcement Resp.)

Agreement.

(See

generally

Settlement-

On February 17, 2017, Defendants and Tesluk

filed the Leave-to-Supplement Opposition.
On February 28, 2017, the Court entered an order addressing
the July 2016 Motion to Dismiss.

(Order, ECF No. 246.)

The

Court noted that, if it granted the Settlement-Enforcement Motion, the July 2016 Motion to Dismiss would be moot.
2.)

(Id. at

The Court denied the July 2016 Motion to Dismiss to the ex-

tent it requested dismissal of the action.

(Id. at 3.)

Because

Defendants had faced a deadline when they filed the July 2016
Motion to Dismiss, that motion had requested, in the alternative, an extension of time to file a motion for sanctions based
on any “additional or new discovery deficiencies.”

(Id.)

The

Court granted the July 2016 Motion to Dismiss insofar as it requested an extension of time.

(Id.)

The Court gave Defendants

until March 31, 2017, “to file a motion for sanctions based on
11

additional or new discovery deficiencies.”

(Id.)

On March 31,

2017, Defendants filed the Dismissal Motion.
On April 14, 2017, Plaintiffs filed the Dismissal Response,
which included the Stay Countermotion.

On April 24, 2017, De-

fendants filed the Dismissal Reply.
II.

JURISDICTION
The operative complaint in this action is the Third Amended

Complaint filed by Plaintiffs on January 14, 2015.

(Third Am.

Compl. for Breach of Contract, Theft of Trade Secrets, Conversion, Civil Conspiracy, Procurement of Breach of Contract, and
Interference with Business Relations, ECF No. 47 (“Third Am.
Compl.”).)

Under 28 U.S.C. § 1331, U.S. district courts have

original jurisdiction “of all civil actions arising under the
Constitution,

laws,

or

treaties

of

the

United

States.”

The

Third Amended Complaint asserts, inter alia, that Defendants and
Tesluk violated the U.S. Copyright Act of 1976 by infringing on
copyrighted material in Plaintiffs’ Integrated Process Control
System (“IPCS”).

(See, e.g., Third Am. Compl. ¶¶ 14, 69–77.)

It also asserts, inter alia, that Defendants’ and Tesluk’s conduct related to the IPCS violated the Digital Millennium Copyright Act of 1998.

(Id. ¶¶ 78–85.)

Those claims arise under

the Constitution or laws of the United States.
jurisdiction

over

the

Third

Amended

claims.
12

The Court has

Complaint’s

federal-law

The

Court

has

supplemental

jurisdiction

state-law claims under 28 U.S.C. § 1367(a).

over

Plaintiffs’

Those claims derive

from a “common nucleus of operative fact” with the federal-law
claims.

United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 725

(1966); Soehnlen v. Fleet Owners Ins. Fund, 844 F.3d 576, 588–89
(6th Cir. 2016).
III. ANALYSIS
A.

Leave-to-Supplement Motion

The

Leave-to-Supplement

Motion

asks

the

Court

to

allow

Plaintiffs to “supplement” the Olita Response with the Settlement-Enforcement Response.

(Leave-to-Suppl. Mot. 1.)

Plain-

tiffs represent that, when Olita submitted the Olita Response,
Plaintiffs had been unable to find substitute counsel following
the withdrawals of Weirich and Peel.

(Id. at 1–2.)

Plaintiffs

represent that they found replacement counsel on December 27,
2016,

and

that

permitting

the

Settlement-Enforcement

would cause “minimal” prejudice to Defendants.

Response

(Id. at 2.)

The Leave-to-Supplement Opposition argues that the Settlement-Enforcement Response is “procedurally improper,” “untimely,”

and

would

prejudice

Defendants

and

Tesluk.

(Leave-to-

Suppl. Opp’n 3; see generally id. at 3–4.)
Neither Plaintiffs nor Defendants and Tesluk provide any
citations to rules or caselaw addressing the Court’s ability to

13

grant Plaintiffs leave to file the Settlement-Enforcement Response.
The Court will not rely on the Olita Response.

In federal

court, corporations and limited-liability companies must be represented by counsel.

See, e.g., Sharpe v. Sierra Leone Ministry

of Surveys, Lands & Env’t, No. 2:13-CV-00187, 2015 WL 247949, at
*2 (S.D. Ohio Jan. 20, 2015) (citing cases) (corporations), report and recommendation adopted sub nom. Sharpe v. Sierra Leone
Ministry of Surveys, No. 2:13-CV-187, 2015 WL 5190951 (S.D. Ohio
Sept. 4, 2015); Wilson v. Acacia Dermatology PLLC, No. 1:11-CV00069, 2011 WL 3651779, at *1 (M.D. Tenn. Aug. 18, 2011) (citing
cases) (limited-liability companies).

Olita is not an attorney.

He cannot represent ECIMOS or EC.
The Court construes the Leave-to-Supplement Motion as a request to permit a late filing.

The October 2016 Order gave

Plaintiffs until October 24, 2016, to respond to the SettlementEnforcement Motion.

(October 2016 Order 12.)

The Leave-to-

Supplement Motion asks the Court to consider a filing made on
February 7, 2017, well beyond the Court’s deadline.
“Matters of docket control . . . are within the sound discretion of the district court.”

Eng’g & Mfg. Servs., LLC v.

Ashton, 387 F. App’x 575, 582 (6th Cir. 2010) (citing Sixth Cir-

14

cuit cases).

Under Rule 6(b)(1)(B), 3 “[w]hen an act may or must

be done within a specified time, the court may, for good cause,
extend the time . . . on motion made after the time has expired
if

the

party

failed

to

act

because

of

excusable

neglect.”

Courts should determine whether there is excusable neglect considering “five principal factors”: “(1) the danger of prejudice
to the nonmoving party, (2) the length of the delay and its potential impact on judicial proceedings, (3) the reason for the
delay, (4) whether the delay was within the reasonable control
of the moving party, and (5) whether the late-filing party acted
in good faith.”

Ashton, 387 F. App’x at 582 (quoting Nafziger

v. McDermott Int’l, Inc., 467 F.3d 514, 522 (6th Cir. 2006)).
Plaintiffs failed to act because of excusable neglect.
danger of prejudice to Defendants or Tesluk is minimal.
tiffs

filed

the

Leave-to-Supplement

Motion

more

than

The

Plainthree

months after the relevant deadline, but given this matter’s convoluted history, considering the Settlement-Enforcement Response
will not deleteriously impact the proceedings.

Much of the de-

lay in filing the Leave-to-Supplement Motion occurred because
Plaintiffs were searching for new counsel.

It took Plaintiffs’

new counsel six weeks to file the Leave-to-Supplement Motion,
but there is no indication that the Leave-to-Supplement Motion

3

References to “Rule __” are to the Federal Rules of Civil Procedure.
15

was

filed

in

bad

faith.

The

Leave-to-Supplement

Motion

is

GRANTED, and the Court will consider the Settlement-Enforcement
Response.
B.

Settlement-Enforcement Motion

The Settlement-Enforcement Motion asks the Court to enforce
the WSA.

(Settlement-Enforcement Mot. ¶ 3.)

The Settlement-

Enforcement Motion asks the court to “[f]ind the [WSA] is binding upon all [p]arties”; to “[d]ismiss this case, with prejudice”; and to “[a]ward Defendants their attorney fees and costs
incurred since . . . September 26, 2016 . . . as a sanction for
Plaintiffs’ and Mr. Olita’s conduct and pursuant to the terms
and provisions of the [WSA].”

(Id. ¶ 9.)

If the Court finds

that the WSA is not binding, the Settlement-Enforcement Motion
asks the Court, in the alternative, to dismiss the case with
prejudice, to order Plaintiffs’ to pay all attorneys’ fees and
expenses incurred “in connection with the negotiation and preparation of the [WSA],” and to order Plaintiffs to pay all previously awarded amounts.

(Id. ¶ 10.)

In support of the Settlement-Enforcement Motion, Defendants
and Tesluk argue that the Court has the “inherent power” to enforce settlement agreements agreed to by the parties.

(Settle-

ment-Enforcement Mem. 7 (quoting Brock v. Scheuner Corp., 841
F.2d 151, 154 (6th Cir. 1998).)

16

Defendants and Tesluk argue

that the WSA is valid and binding under Tennessee contract law.
(Id. at 7–10.)
The Settlement-Enforcement Response argues that the WSA is
not an enforceable agreement binding Plaintiffs.
Settlement-Enforcement Resp.)

(See generally

Plaintiffs argue that, throughout

the WSA’s negotiation and preparation, Weirich and Peel had an
ethical conflict with Plaintiffs.

(Id. at 1–3.)

Specifically,

Plaintiffs claim that Weirich’s and Peel’s goal in settlement
negotiations was to resolve the Court’s sanctions award against
Weirich and Peel, and that Weirich and Peel sacrificed Plaintiffs’ interests to advance that goal.

(Id. at 2–3.)

Plain-

tiffs also represent that, on September 26, 2016, Plaintiffs
expressed disagreement with the proposed settlement and refused
to sign the WSA.
In

the

(Id. at 4.)

Leave-to-Supplement

Opposition,

Defendants

and

Tesluk state that “Plaintiffs admit they sought and authorized
their

counsel

Opp’n 2.)
tiffs’

to

negotiate

a

settlement.”

(Leave-to-Suppl.

Defendants and Tesluk also state that under Plain-

theory ––

i.e.,

that

there

is

no

binding

settlement

agreement –– Plaintiffs are in violation of the Order Granting
Motion to Compel Compliance.

(Id. at 2, 4–6.)

The key issue is Weirich’s and Peel’s authority.

Defend-

ants and Tesluk argue that the agreement between Weirich and
Peel and Defendants meets all the requirements of a contract.
17

Even if that be true, the agreement binds Plaintiffs only if
Weirich and Peel had the authority to enter into the agreement
on Plaintiffs’ behalf.

The Court need not address Plaintiffs’

arguments about an alleged ethical conflict if Weirich and Peel
lacked the authority to enter into the WSA on Plaintiffs’ behalf.
A preliminary question is what law governs the authority to
settle.

The WSA contains a choice-of-law provision stating that

the “Agreement shall be construed in accordance with and governed

by

the

laws

of

the

state

of

Tennessee.”

Agreement § 16, ECF No. 238–14 (“WSA”).)

(Settlement

Plaintiffs, however,

contend they did not agree to enter into the WSA.

Where there

is a dispute about contract formation, the choice-of-law provision in the relevant alleged contract does not dictate the law
that applies to contract formation.

See, e.g., Wynn v. Five

Star Quality Care Tr., No. 3:13-CV-01338, 2014 WL 2560603, at *6
(M.D. Tenn. June 5, 2014).
Defendants, Tesluk, and Plaintiffs rely on Tennessee authority

in

their

briefs.

(See,

e.g.,

Settlement-Enforcement

Mem. 7–10 (citing Tennessee law on contract formation); Settlement-Enforcement
conduct).)

Resp.

2

(citing

Tennessee

rules

on

attorney

When parties do not dispute that a given state’s

substantive law applies, the Court need not conduct a choice-oflaw analysis sua sponte.

Stein v. Regions Morgan Keenan Select
18

High Income Fund (In re Regions Morgan Keegan Sec., Derivative &
ERISA Litig.), 166 F. Supp. 3d 948, 957 (W.D. Tenn. 2014) (citing GBJ Corp. v. Eastern Ohio Paving Co., 139 F.3d 1080, 1085
(6th Cir. 1998)).

Tennessee law governs whether Weirich and

Peel had authority to bind Plaintiffs to the WSA.
“The general rule in Tennessee is that an attorney cannot
surrender substantial rights of a client, including agreeing to
dismissal of litigation which permanently bars a client from
pursuing his claim, without the express authority of the client.”

Absar v. Jones, 833 S.W.2d 86, 89 (Tenn. Ct. App. 1992)

(citing Tennessee cases); see also Harris v. City of Chattanooga,

137

F.

App’x

788,

793

(6th

Cir.

2005)

(quoting

Absar);

Schauffert v. Certain Underwriters at Lloyd’s, London, No. 3-090510, 2011 WL 1156608, at *8 (M.D. Tenn. Mar. 28, 2011) (same),
report

and

recommendation

adopted,

1671638 (M.D. Tenn. May 3, 2011).

No.

3-09-0510,

2011

WL

The WSA would “surrender sub-

stantial rights” of Plaintiffs because it would lead to the dismissal of Plaintiffs’ claims with prejudice.
5.)

(See WSA §§ 2.1,

To enter into the WSA on Plaintiffs’ behalf, Weirich and

Peel needed “express authority” to do so.
“In Tennessee, an agent’s express authority is that which
the principal gives to him in direct terms, either orally or
written.”

Rubio v. Precision Aerodynamics, Inc., 232 S.W.3d

738, 742–43 (Tenn. Ct. App. 2006) (citing Hollingshead Co. v.
19

Baker, 4 Tenn. App. 362, 368 (1927)).

There is no record evi-

dence that Plaintiffs gave Weirich and Peel express authority to
enter

into

the

WSA.

Defendants

and

Tesluk

cite

Plaintiffs’

statement that, “on September 22, 2016, Plaintiffs authorized
[Weirich and Peel] to engage in settlement negotiations.”

(Set-

tlement-Enforcement Resp. 3, cited at Leave-to-Suppl. Opp’n 2.)
That admission demonstrates, at most, that Weirich and Peel had
express authority to negotiate toward a settlement.

It does not

establish that Weirich and Peel had express authority to enter
into the WSA on Plaintiffs’ behalf.
Because Weirich and Peel did not have express authority to
enter into the WSA, the WSA does not bind Plaintiffs.

The Set-

tlement-Enforcement Motion is DENIED.
The Settlement-Enforcement Motion seeks three forms of relief if this Court does not enforce the WSA: dismissal of the
case with prejudice, an order granting Defendants and Tesluk the
attorney fees expended in the negotiation and preparation of the
WSA, and an order demanding payment of “all amounts previously
awarded to the respective Defendants pursuant to the Court’s Orders.”

(Settlement-Enforcement Mot. ¶ 10.)

The request for

dismissal in the Settlement-Enforcement Motion is DENIED as moot
because the Court is granting the Dismissal Motion.
tion III.D infra.)

20

(See Sec-

The request in the Settlement-Enforcement Motion for an order demanding payment of previously awarded amounts is GRANTED.
That relief is a natural result of the unenforceability of the
WSA.

Plaintiffs are ORDERED to pay Defendants and Tesluk the

previously awarded amounts that Plaintiffs owe Defendants and
Tesluk

and

that

Plaintiffs

have

not

paid.

Plaintiffs

owe

$3,347.50 to Tesluk; $1,326.00 to Roane and Gray collectively;
$11,733.48 to LSI and LSL collectively; and $37,496.00 to Nortek
Global.

(Fee Order 20.)

The request in the Settlement-Enforcement Motion for attorney fees incurred in the negotiation and preparation of the WSA
is DENIED.

The Court is dismissing this action with prejudice.

A further sanctions award based on Defendants’ and Tesluk’s fees
associated with the WSA is not warranted.
C.

Reconsideration Motion

The Reconsideration Motion asks the Court to revise the
June 2016 Order “to remove that portion which affirms the Magistrate’s

sanctions

March 2016 Report.

award

against

Plaintiffs’

counsel”

(Reconsideration Mot. 1.)

in

the

It argues that

the objections of Plaintiffs’ counsel to the March 2016 Report
were timely and that the Court failed to give de novo consideration to them.
Magistrate

(Id. at 2–7.)
Judge

Vescovo’s

Reconsideration

Report

recom-

mends that the Court find that Weirich’s and Peel’s objections
21

to the March 2016 Report were timely.
3–4.)

(Reconsideration Report

It recommends that the Court deny the Reconsideration Mo-

tion “to the extent [it] seeks revision of the [March 2016 Report],” but recommends that the Court “reconsider [its June 2016
Order] if it failed to consider the objections filed by the
Plaintiffs.”

(Id. at 2.)

Congress enacted 28 U.S.C. § 636 to relieve the burden on
the federal judiciary by permitting the assignment of districtcourt duties to magistrate judges.
237

F.3d

598,

602

(6th

Cir.

See United States v. Curtis,

2001)

(citing

Gomez

v.

United

States, 490 U.S. 858, 869–70 (1989)); see also Baker v. Peterson, 67 F. App’x 308, 310 (6th Cir. 2003).

“The district judge

must determine de novo any part of the magistrate judge’s disposition that has been properly objected to.”
72(b)(3); see also 28 U.S.C. § 636(b)(1).

Fed. R. Civ. P.

After reviewing the

evidence, the court is free to accept, reject, or modify the
magistrate

judge’s

proposed

U.S.C. § 636(b)(1).

findings

or

recommendations.

28

The district court is not required to re-

view –– under a de novo or any other standard –– those aspects
of the report and recommendation to which no objection is made.
Thomas v. Arn, 474 U.S. 140, 150 (1985).
should

adopt

the

magistrate

judge’s

which no specific objection is filed.

22

The district court

findings

and

Id. at 151–52.

rulings

to

The

Reconsideration

Report

asks

the

Court

to

determine

whether it gave proper consideration to Plaintiffs’ objections
to the March 2016 Report.

(Reconsideration Report 5.)

The

Court reviewed those objections de novo, the proper level of review.

(See June 2016 Order 9–15.)

review

notwithstanding

the

Court’s

It gave the objections that
ultimately

erroneous

view

that Plaintiffs’ objections to the March 2016 Report were untimely.

(See, e.g., id. at 8 (“Even if Plaintiffs’ [objections

are] considered on [their] merits, [they] must fail.”).)

Fully

adopting the Reconsideration Report would lead to denial of the
Reconsideration Motion.
The Court has further considered the award of sanctions
against Weirich and Peel.

Those sanctions are not appropriate

in the context of this case.

That conclusion is not based on

changed facts underlying the sanctions award, but on reconsideration of how the relevant legal standards apply to the facts.
The March 2016 Report bases the sanctions award against
Weirich and Peel on five separate sources: Rule 37(b)(2)(A),
Rule 37(c)(1), Rule 26(g)(3), 28 U.S.C. § 1927, and the court’s
inherent power.

(March 2016 Report 3, 32–33.)

None of those

sources mandates a sanctions award following problematic discovery conduct.
Under Rule 37(b)(2)(C), if a party “fails to obey an order
to provide or permit discovery,” the court “must order the diso23

bedient party, the attorney advising that party, or both to pay
the reasonable expenses, including attorney’s fees, caused by
the failure.”

The court need not issue such an order, however,

if “the failure was substantially justified or other circumstances make an award of expenses unjust.”

Fed. R. Civ. P.

37(b)(2)(C).
Under Rule 37(c)(1)(A), “[i]f a party fails to provide information or identify a witness as required by Rule 26(a) or
(e),” the court “may order payment of the reasonable expenses,
including attorney’s fees, caused by the failure.”
added.)

(Emphasis

As the use of “may” indicates, courts have wide discre-

tion in imposing sanctions under Rule 37(c)(1)(A).

See, e.g.,

Adkins v. Shelter Mut. Ins. Co., No. 5:12-CV-173-KKC-REW, 2014
WL 12648463, at *2 (E.D. Ky. Dec. 15, 2014); Marais v. Chase
Home Fin., LLC, 24 F. Supp. 3d 712, 730 (S.D. Ohio 2014).
Under

Rule

26(g)(1),

“[e]very

disclosure

under

Rule

26(a)(1) or (a)(3) and every discovery request, response, or objection

must

ord . . . .”
this

rule

be

signed

by

at

least

one

attorney

of

rec-

Rule 26(g)(3) states, “If a certification violates

without

substantial

justification,

the

court . . .

must impose an appropriate sanction on the signer, the party on
whose behalf the signer was acting, or both.

The sanction may

include an order to pay the reasonable expenses, including attorney’s fees, caused by the violation.”
24

(Emphasis added.)

The

use of “may” again indicates that courts have wide discretion
when deciding whether to impose a fee award under Rule 26(g)(3).
See, e.g., Beard v. City of Southfield, No. 14-13465, 2016 WL
6518490, at *4 (E.D. Mich. Nov. 3, 2016); Shapiro v. Plante &
Moran, LLP (In re Connolly N. Am., LLC), 376 B.R. 161, 193
(Bankr. E.D. Mich. 2007).
Pursuant to 28 U.S.C. § 1927, “[a]ny attorney . . . who so
multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the
excess costs, expenses, and attorneys’ fees reasonably incurred
because of such conduct.”

“Courts have ‘broad discretion’ when

deciding whether to award sanctions under [§] 1927.”

Sandweiss

v. Spirit Airlines, Inc., No. 16-CV-12114, 2017 WL 2438790, at
*7 (E.D. Mich. June 6, 2017) (quoting N. Ky. Right to Life
Comm., Inc. v. Ky. Registry of Election Fin., Nos. 95-6334, 965395, 1998 WL 13405, at *8 (6th Cir. Jan. 7, 1998)); see also
Miller v. Food Concepts Int’l, LP, No. 2:13-CV-00124, 2016 WL
5122541, at *2 (S.D. Ohio Sept. 21, 2016).
A court has the “inherent power” to assess attorney fees as
a sanction “when a party has acted in bad faith, vexatiously,
wantonly, or for oppressive reasons.”

Chambers v. NASCO, Inc.,

501 U.S. 32, 45–46 (1991); see also United States ex rel. Tingley

v.

PNC

Fin.

Servs.

Grp.,

Inc.,

3098178, at *2 (6th Cir. July 21, 2017).
25

No.

16-1725,

2017

WL

The Supreme Court has

explicitly stated, however, that this power “must be exercised
with restraint and discretion.”

Chambers, 501 U.S. at 44; see

also Tingley, 2017 WL 3098178, at *2.
All of these sources provide that a court’s power to impose
attorney-fee sanctions is discretionary.

The source that comes

closest to creating a mandatory sanction –– Rule 37(b)(2)(A) ––
permits a court to refrain from imposing a fee award if circumstances would make that unjust.
here.

For

the

same

reasons

There are such circumstances
that

a

fee

award

under

Rule

37(b)(2)(A) is not justified, an award of fees under the other
sources of sanctioning authority would be unjustified.
A significant factor here is Weirich’s and Peel’s limited
time as counsel when the sanction-triggering conduct occurred.
Plaintiffs
case.

have

retained

numerous

counsel

since

filing

this

When ECIMOS filed its original complaint in this action

in state court in May 2013, Weirich and Peel were its counsel.
(Compl. for Breach of Contract, Theft of Trade Secrets, Conversion, Civil Conspiracy, Procurement of Breach of Contract, and
Interference with Business Relations 12, ECF No. 1-3 at PageID
21.)

On March 17, 2014, Weirich and Peel moved to withdraw as

counsel.

(Mot. to Withdraw as Counsel of Record for Pl. 1, ECF

No. 1-11 at PageID 647–48.)

Weirich and Peel were replaced by

Lewis

Mark

Clayton

Culpepper

and

Field

of

Evans

Petree,

PC.

(See, e.g., Notice of Appearance, ECF No. 1-11 at PageID 649;
26

Order Granting Mot. to Withdraw as Counsel of Record for Pl.,
ECF No. 1-11 at PageID 651.)
Culpepper and Field began as ECIMOS’s counsel of record in
April 2014.

EC was added in August 2014, in an amended com-

plaint filed by Culpepper, Field, and Michael Marshall, another
Evans Petree attorney.

(See, e.g., Mot. for Leave to Amend the

Compl., ECF No. 1-12 at PageID 666–67.)

The Evans Petree attor-

neys were Plaintiffs’ counsel when the case was removed to this
Court.

(See, e.g., Notice of Removal 7, ECF No. 1 (certificate

of service naming Evans Petree attorneys).)
On January 29, 2015, Plaintiffs filed a motion asking the
Court for permission to substitute counsel.

(Pls.’ Mot. for

Substitution of Counsel and Cert. of Consultation, ECF No. 53.)
On February 6, 2015, the motion was granted.

(Order Granting

Pls.’ Mot. for Substitution of Counsel, ECF No. 56.)
Bonderud

of

the

Bonderud

Plaintiffs’ counsel.

Law

Firm,

P.A.,

was

Andrew M.

substituted

as

(Id. at 1.)

On September 23, 2015, Bonderud filed a motion asking the
Court to permit him to withdraw from representing Plaintiffs.
(Mot. to Withdraw as Counsel of Record Without Substitution, ECF
No. 114.)

Bonderud represented that “[m]ultiple grounds for

withdrawal exist” under Rule 1.16 of the Tennessee Rules of Professional Conduct and that “[t]hese matters constitute irreconcilable differences and good cause for withdrawal.”
27

(Id. ¶¶ 1,

3.)

Bonderud also represented that Plaintiffs had been unable

to secure substitute counsel.

(Id. ¶ 4.)

During a telephone status conference on December 16, 2015,
Bonderud represented that Plaintiffs had been able to find substitute counsel: Weirich and Peel.

(Minutes, ECF No. 150.)

The

same day, the Court entered an order granting Bonderud’s motion
to withdraw.

(Order Granting Mot. to Withdraw, ECF No. 152.)

On January 4, 2016, Weirich and Peel filed their appearances in
this Court.

(Notice of Appearance, ECF No. 153 (Peel); Notice

of Appearance, ECF No. 154 (Weirich).)
As discussed above (see Section I supra), Weirich and Peel
filed motions to withdraw as Plaintiffs’ counsel on October 4,
2016.

Both Weirich and Peel asserted that “[f]urther represen-

tation of Plaintiffs will result in a violation” of the Tennessee

Rules

of

“required”

the

Professional

Conduct,

requests

withdrawal.

for

and

that

those

(Weirich

Mot. ¶¶ 1, 2; Peel Withdrawal Mot. ¶¶ 1, 2.)

rules

Withdrawal

The Court granted

those motions on October 12, 2016, and Plaintiffs’ current counsel filed appearances in late December 2016.
pra.)

(See Section I su-

Plaintiffs have changed counsel four times in less than

three-and-a-half years.

In two instances, counsel have asked to

withdraw because of ethical concerns about continued representation.

28

These

repeated

changes

of

counsel

award against Weirich and Peel.
sel,

they

inherited

discovery

affect

the

sanctions

In their second time as coundisputes

they

did

not

create.

During 2015, when Plaintiffs were represented by prior counsel,
Defendants and Tesluk collectively brought at least four discovery disputes to the Court.

(See, e.g., Defs. Nortek Global HVAC

LLC and Nortek, Inc.’s Mot. to Compel Discovery from Pls. ECIMOS, LLC, and Electrical Controls, Inc., ECF No. 79 (“First Mot.
to Compel”); Defs. Logical Sys. Inc., Logical Sys., LLC, and
Nortek Global HVAC LLC’s Mot. to Compel Discovery from Pls. ECIMOS, LLC, and Electrical Controls, Inc., ECF No. 82 (“Second
Mot. to Compel”); David Tesluk’s Mot. to Compel Discovery from
Pls.

ECIMOS,

LLC,

and

Electrical

Controls,

Inc.,

ECF

No.

97

(“Third Mot. to Compel”); Defs. Logical Systems, Inc. and Logical Systems, LLC’s Mot. to Compel Discovery from Pls. ECIMOS,
LLC and Electrical Controls, Inc., ECF No. 99 (“Fourth Mot. to
Compel”).)

These disputes resulted in orders compelling Plain-

tiffs (not Plaintiffs’ counsel) to pay $63,338.04 in attorney
fees.

(See, e.g., Pls.’ Objs. to Magistrate Judge’s Orders ¶ 1,

ECF No. 141 (stating amount of award); Order, ECF No. 149 (ordering

payment

Judge’s award).)

following

Plaintiffs’

objections

to

Magistrate

Plaintiffs’ discovery conduct throughout 2015

was not consistent with their obligations.

29

When they re-entered the case, Weirich and Peel became involved in these ongoing controversies.

Within a month of filing

their notices of appearance in January 2016, Weirich and Peel
attended a hearing on discovery issues before Magistrate Judge
Vescovo.

(See, e.g., Minute Entry, ECF No. 160.)

Counsel’s

preparation for and conduct at that hearing motivated the sanctions award in the March 2016 Report.

The Court agrees with the

March 2016 Report that Weirich’s and Peel’s handling of discovery matters in January 2016 was not optimal.

On reflection,

however, the Court no longer believes that Weirich’s and Peel’s
faults in January and February 2016 merit a sanctions award.
The circumstances here are sui generis.

The two most critical

are (1) the short time between Weirich’s and Peel’s re-entering
the case and the February 3, 2016 hearing, and (2) the clear
record that Plaintiffs are contumacious clients who are unwilling to comply with the rules and orders of the Court.

In these

unique circumstances, the sanctions award against Weirich and
Peel will be stricken. 4

4

The March 2016 Order states that, “[s]hould the district court
not adopt this portion of the Report and Recommendation recommending the imposition of sanctions on the Plaintiffs’ attorneys, it is recommended that these expenses and attorney’s
fee[s] be imposed on the Plaintiffs.”
(March 2016 Report 55
n.21.)
The Court is reversing the sanctions award against
Weirich and Peel, but imposing those sanctions on Plaintiffs, as
recommended by the Magistrate Judge, would not be appropriate
given the result in this case. Plaintiffs are at fault for the
30

The Reconsideration Motion is GRANTED.

The sanctions award

against Weirich and Peel in the June 2016 Order is stricken.
D.

Dismissal Motion and Stay Countermotion

Defendants argue in the Dismissal Motion that the Court
should enforce the WSA.

(Dismissal Mot. 2, 3, 6.)

Alternative-

ly, Defendants ask the Court to sanction Plaintiffs by, inter
alia, dismissing this action with prejudice.
particular,

Defendants

represent

that,

(Id. at 4–6.)

notwithstanding

In

their

challenge to the Settlement-Enforcement Motion, Plaintiffs have
done

nothing

“Most

since

notably,

September

Plaintiffs’

2016

to

inaction

move

the

includes

case

forward:

failures

to:

(i) comply with the Court’s Order to pay the Court-awarded sanctions by September 26, 2016 . . . ; (ii) cure, much less attempt
to cure, their numerous discovery deficiencies that Defendants
identified over one year ago and which the Court ordered Plaintiffs to address; and (iii) take any action to prosecute this
case.”

(Id. at 1–2 (emphasis in original); see also id. at 2–

4.)
The Dismissal Response represents that Plaintiffs had difficulty finding replacement counsel after the Court permitted
Weirich

and

Peel

to

withdraw,

and

argues

that

Weirich’s

and

status of discovery in January 2016. Because the Court is sanctioning Plaintiffs by dismissing this action, however, the further sanction of imposing additional expenses and fees on
Plaintiffs is unnecessary.
31

Peel’s conduct in negotiating the WSA was unethical.
Resp. 1–2.)
lessly

and

(Dismissal

Plaintiffs represent that they have “worked tirehave

incurred

fees

and

expenses

totaling

tens

of

thousands of dollars to engage in the discovery process in good
faith and get back into the lawsuit,” pointing to a purportedly
similar case in this District, ECIMOS, LLC v. Carrier Corp.,
Case No. 15-2726 (W.D. Tenn.).

(Id. at 2–3.)

Plaintiffs argue

that they have been waiting for the Court to resolve the Settlement-Enforcement Motion, arguing that “[i]t is illogical to expect

Plaintiffs

to

incur

tens

of

thousands

[of]

dollars

in

additional expenses, notwithstanding the considerable sanctions
award that would have to be paid, to address and engage in the
discovery process in good faith in this matter only to have the
illegal settlement agreement enforced against them.”
3.)

(Id. at

In the Stay Countermotion, Plaintiffs ask the Court to stay

discovery in this matter and stay “any continued efforts by Defendants to have the case dismissed through sanctions.”

(Id.)

In the alternative, Plaintiffs ask the Court for “ninety (90)
days to address the discovery issues in this matter and be given
an opportunity to get back into the lawsuit with the assistance
of their present representation.”

(Id.)

The Dismissal Reply reiterates Defendants’ view that the
WSA binds Plaintiffs.

(See, e.g., Dismissal Reply 1–2.)

De-

fendants also reiterate that, if the Court does not enforce the
32

WSA, the Court should dismiss this matter with prejudice.
at 3.)

(Id.

Defendants repeat their claim that Plaintiffs have done

nothing in the case since September 2016, and argue that Plaintiffs’ discovery conduct in a separate matter is irrelevant to
their conduct in this case.

(Id. at 2.)

Defendants argue that

the Stay Countermotion is “procedurally defective” and merely an
“attempt to avoid the inevitable consequences of Plaintiffs’ total lack of action on these issues for over a year.”

(Id. at

5.)
The WSA is not enforceable.

The remaining issue in the

Dismissal Motion is whether to dismiss this case with prejudice
based on Plaintiffs’ discovery misconduct.

The Dismissal Motion

invokes Rule 37(b)(2)(A), which provides for dismissal for a
party’s

failure

to

comply

with

a

discovery

order,

and

Rule

41(b), which provides for dismissal where a plaintiff fails to
prosecute its case or fails to comply with a court order.

(Dis-

missal Mot. 5.)
Under either Rule 37(b)(2)(A) or Rule 41(b), courts consider four factors when deciding whether to impose dismissal as a
sanction for litigant conduct: “‘(1) whether the party’s failure
is due to willfulness, bad faith, or fault; (2) whether the adversary

was

prejudiced

by

the

dismissed

party’s

conduct;

(3) whether the dismissed party was warned that failure to cooperate

could

lead

to

dismissal;
33

and

(4)

whether

less

drastic

sanctions were imposed or considered before dismissal was ordered.”

Barron v. Univ. of Mich., 613 F. App’x 480, 484 (6th

Cir. 2015) (quoting United States v. Reyes, 307 F.3d 451, 458
(6th Cir. 2002)) (Rule 37(b)(2)(A) context); United States v.
$506,069.09 Seized from First Merit Bank, 664 F. App’x 422, 427
(6th Cir. 2016) (quoting Carpenter v. City of Flint, 723 F.3d
700, 703–04 (6th Cir. 2013)) (Rule 41(b) context).

All of these

factors favor dismissal of this action with prejudice.
Plaintiffs have repeatedly failed to comply with the rules
of discovery and the orders of this Court.

That failure is not

limited to the last year, but has continued for many years.
Plaintiffs’ conduct in the last year, however, is consistent
with their prior failures.
Defendants

state

that

Plaintiffs

have

failed

to

“comply

with the Court’s Order to pay the Court-awarded sanctions by
September 26, 2016.”

(Dismissal Mot. 1.)

Plaintiffs do not

dispute that they have not complied with that order.
erally Dismissal Resp.)

(See gen-

Plaintiffs argue that, because the WSA,

if approved, would have resolved the sanctions award, it would
make little sense for Plaintiffs to pay the award before the
Settlement-Enforcement Motion was resolved.
argument is not well-taken.
September 27, 2016.

(Id. at 3.)

That

Plaintiffs filed the Stay Motion on

The Stay Motion sought to stay Magistrate

Judge Vescovo’s Order Granting Motion to Compel Compliance.
34

The

Stay Motion has not been granted.

The deadline in the Order

Granting Motion to Compel Compliance has remained in effect.

By

failing to pay the sanctions award, Plaintiffs are in violation
of the Court’s order.
Defendants state that Plaintiffs have not cured, or attempted to cure, “their numerous discovery deficiencies that Defendants identified over a year ago and which the Court ordered
Plaintiffs to address.”
nal).)

(Dismissal Mot. 1 (emphasis in origi-

Plaintiffs do not seriously dispute this claim.

generally Dismissal Resp.)

(See

Instead, Plaintiffs argue that their

lack of progress should be excused because of the dispute over
the Settlement-Enforcement Motion.
is not well-taken.

(Id. at 3.)

That argument

As Defendants point out, Plaintiffs’ use of

the Settlement-Enforcement Motion is self-serving.

Given Plain-

tiffs’ contention that the WSA was not enforceable and that the
Settlement-Enforcement

Motion

should

be

denied,

Plaintiffs

should have paid the outstanding sanctions award and proceeded
with discovery.

By choosing not to do so, Plaintiffs ran the

risk of being where they are now: the Court has agreed that the
WSA is not enforceable, but Plaintiffs have done nothing to resolve the underlying discovery problems that derailed this case
in the first place.

Plaintiffs have repeatedly failed to comply

with the discovery ordered by the Court.

35

Defendants state that Plaintiffs have failed to “take any
action to prosecute this case” since September 2016.
Mot. 2.)

(Dismissal

Rule 41(b) permits a court to dismiss a case based on

a plaintiff’s failure to prosecute.

Plaintiffs’ only response

is that the Settlement-Enforcement Motion made it reasonable for
Plaintiffs to refrain from proceeding on their case.

For the

reasons discussed above, that argument is not well taken.
The first dismissal factor provides that, “[f]or a plaintiff’s actions to be motivated by bad faith, willfulness, or
fault, his conduct ‘must display either an intent to thwart judicial proceedings or a reckless disregard for the effect of
[his] conduct on those proceedings.’”

Wu v. T.W. Wang, Inc.,

420 F.3d 641, 643 (6th Cir. 2005) (quoting Mulbah v. Detroit Bd.
of Educ., 261 F.3d 586, 591 (6th Cir. 2001)) (second alteration
in original).

There must be a “clear record of delay or contu-

macious conduct.”
Cir. 1997).

Freeland v. Amigo, 103 F.3d 1271, 1277 (6th

Plaintiffs’ conduct meets this standard.

Plain-

tiffs have been sanctioned five times in this case for discovery
violations, do not seriously dispute that they have yet to correct previous discovery deficiencies, and have twice let the
case languish for months for no good reason.
continued

despite

numerous

changes

of

That pattern has

counsel.

Plaintiffs’

failure to follow court orders (including discovery orders) and
failure to prosecute their case are entirely Plaintiffs’ respon36

sibility.

There is a clear record of delay and contumacious

conduct, and Plaintiffs have demonstrated a reckless disregard
for the effect of that conduct on this proceeding.
The second dismissal factor provides that, “‘[a] defendant
is prejudiced by the plaintiff’s conduct where the defendant
waste[d] time, money, and effort in pursuit of cooperation which
[the plaintiff] was legally obligated to provide.’”

Shavers v.

Bergh, 516 F. App’x 568, 570 (6th Cir. 2013) (quoting Schafer v.
City of Defiance Police Dep’t, 529 F.3d 731, 736 (6th Cir. 2008)
(second and third alterations in Shavers)).

This factor is met.

The docket shows that Defendants have been prejudiced by Plaintiffs’ conduct: Defendants have had to prepare and file repeated
motions that would have been unnecessary if Plaintiffs had complied with their discovery obligations.

The cost to Defendants

in time, money, and effort is demonstrated, in part, by the
sanctions that have been imposed.
The third dismissal factor provides that a party must have
been warned.

Plaintiffs have been warned no fewer than six

times since September 2015 that failure to cooperate with discovery

obligations

or

court

orders

could

lead

to

dismissal.

(See, e.g., Order Granting Nortek Global HVAC LLC’s Mot. to Compel Discovery from Pls. ECIMOS, LLC and Electrical Controls,
Inc. 4, ECF No. 106 (“Order on First Mot. to Compel”); Order
Granting Defs. Logical Systems, Inc., Logical Systems, LLC, and
37

Nortek Global HVAC LLC’s Mot. to Compel Discovery from Pls. ECIMOS, LLC and Electrical Controls, Inc. 4, ECF No. 105 (“Order on
Second Mot. to Compel”); Order Granting Def. David Tesluk’s Mot.
to Compel Discovery from Pls. ECIMOS, LLC, and Electrical Controls, Inc. 5, ECF No. 108 (“Order on Third Mot. to Compel”);
Order on Defs. Logical Systems, Inc. and Logical Systems, LLC’s
Mot. to Compel Discovery from Pls.’ ECIMOS, LLC, and Electrical
Controls, Inc. 3, ECF No. 104 (“Order on Fourth Mot. to Compel”); March 2016 Report 28; Fee Order 19 n.3.)

Indeed, in her

March 2016 Report, Magistrate Judge Vescovo stated, “In hindsight, the court should have recommended dismissal with prejudice

in

factors

October
were

2015 . . . .

met

at

that

All

point.”

four

of

(March

the

[dismissal]

2016

Report

28.)

Plaintiffs’ claims against one former defendant, Tesluk, have
been dismissed as a sanction for Plaintiffs’ discovery misconduct.

(March 2016 Report 29–31; June 2016 Order 10–12.)

For

almost two years, Plaintiffs have been well aware that this case
was subject to dismissal.
The
sanctions

fourth
should

dismissal
be

This factor is met.
factor

imposed

or

provides
considered

that

less

before

drastic

dismissal.

Sanctions less drastic than dismissal have been considered and
imposed repeatedly.

Plaintiffs have been sanctioned monetarily

at least five times, but Plaintiffs have continued their contumacious conduct.
38

On July 15, 2015, Nortek Global, inter alia, filed a motion
to compel against Plaintiffs.

(First Mot. to Compel.)

tion was granted on September 2, 2015.
Compel.)

(Order on First Mot. to

On July 21, 2015, LSI, LSL, and Nortek Global filed a

second motion to compel against Plaintiffs.
Compel.)

(Second Mot. to

That motion was granted on September 2, 2015.

on Second Mot. to Compel.)

(Third Mot. to Com-

That motion was granted on September 3, 2015.

Third Mot. to Compel.)

(Order on

On August 13, 2015, LSI and LSL filed a

fourth motion to compel against Plaintiffs.
Compel.)

(Order

On August 7, 2015, Tesluk filed a

third motion to compel against Plaintiffs.
pel.)

That mo-

(Fourth Mot. to

That motion was granted in part and denied in part on

September 1, 2015.

(Order on Fourth Mot. to Compel.)

Each of

the four orders addressing the motions to compel awarded attorney fees to the movants.

The total amount of fees and costs

Plaintiffs owed as a result of the four orders was $63,338.04:
$42,142.83 to Nortek Global, $13,669.00 to LSI and LSL collectively, and $7,526.21 to Tesluk.

(See Order Awarding Attorney

Fees and Expenses to Def. Nortek Global HVAC LLC for Amounts Incurred in Preparing and Filing Mot. to Compel 2, ECF No. 127;
Order Awarding Attorney Fees and Expenses to Defs. Logical Systems, Inc., and Logical Sys., LLC, for Amounts Incurred in Preparing and Filing Mot. to Compel 2, ECF No. 128; Order Awarding

39

Attorney Fees and Expenses to Def. David Tesluk for Amounts Incurred in Preparing and Filing Mot. to Compel 2, ECF No. 129.)
Plaintiffs were monetarily sanctioned a fifth time pursuant
to the March 2016 Report and the June 2016 Order.

As noted in

Section I infra, that sanction award was $53,902.98.

(See Fee

Order).
This factor is met.
All four of the factors to be considered before dismissal
under Rule 37(b)(2)(A) and Rule 41(b) are met.

The Dismissal

Motion is GRANTED insofar as it requests that this action be
dismissed.

This action is DISMISSED WITH PREJUDICE. 5

The Stay

Countermotion is DENIED as moot.
The Dismissal Motion also asks the Court to “award[] Defendants their fees and costs in connection” with the July 2016
Motion to Dismiss as well as the Dismissal Motion.
Mot. 6; see also Dismissal Reply 5.)
is a sufficient sanction.

(Dismissal

Dismissal of this action

Imposing an additional fee award is

unnecessary and would not be equitable.

Cf. Fed. R. Civ. P.

37(b)(2)(C) (fee award not required where “circumstances make an

5

Defendants specifically request dismissal of “this action with
prejudice.”
(Dismissal Mot. 6 (emphasis added); see also Dismissal Reply 5 (same language); Settlement-Enforcement Mot. 4
(motion by Defendants and Tesluk seeking dismissal “of the case
with prejudice” if the WSA is determined to be unenforceable).)
The Court construes these requests to mean that Defendants and
Tesluk seek dismissal not only of Plaintiffs’ claims, but of the
entire action, including any remaining counterclaims.
40

award of expenses unjust”).

The Dismissal Motion is DENIED in-

sofar as it requests an award of fees and costs.
E.

Stay Motion

Given the resolution of the other motions in this matter,
that Stay Motion is DENIED as moot.
IV.

CONCLUSION
The Leave-to-Supplement Motion is GRANTED and the Settle-

ment-Enforcement Motion is GRANTED in part and DENIED in part.
Plaintiffs are ORDERED to pay unpaid sanctions awards as follows: $3,347.50 to David Tesluk; $1,326.00 to Gail Wayne Roane
and Michael Gray collectively; $11,733.48 to Logical Systems,
Inc., and Logical Systems, LLC, collectively; and $37,496.00 to
Nortek Global HVAC LLC.

The Reconsideration Motion is GRANTED,

and the sanctions levied against Weirich and Peel in the June
2016 Order are stricken.

The Dismissal Motion is GRANTED in

part and DENIED in part.

This action is DISMISSED WITH PREJU-

DICE.

The Stay Countermotion and the Stay Motion are DENIED as

moot.
So ordered this 11th day of August, 2017.

/s/ Samuel H. Mays, Jr.
SAMUEL H. MAYS, JR.
UNITED STATES DISTRICT JUDGE

41