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Taddeo v. American Invsco Corporation

United States District Court, D. Nevada

February 20, 2015

FRANK TADDEO, et al., Plaintiff(s),
v.
AMERICAN INVSCO CORPORATION, Defendant(s)

ORDER DENYING WITHOUT PREJUDICE MOTION FOR SANCTIONS (Docket No. 235)

NANCY J. KOPPE, Magistrate Judge.

Pending before the Court is Plaintiffs' motion for sanctions arising out of the judgment debtor examination. Docket No. 235. Defendants filed responses in opposition, and Plaintiffs filed a reply. Docket Nos. 236-39. The Court finds the motion properly resolved without oral argument. See Local Rule 78-2.

The Court takes very seriously the factual allegations made by Plaintiffs in their motion, including assertions of disobedience of court orders. The Court also takes very seriously its duty to order relief and sanctions that are based on sound legal authority, are supported by a sufficient evidentiary showing, and are within the powers authorized to magistrate judges. Those concerns are heightened when the relief sought is as significant as Plaintiffs seek here, including a finding of contempt and resulting orders of imprisonment. With that in mind, the Court expressly advised Plaintiffs that all requests for sanctions arising out of the judgment debtor examination had to be clearly enumerated and supported by "legal authority establishing that such relief may be properly granted." Docket No. 232.

Because Plaintiffs' motion failed to provide a sufficient basis for the serious sanctions sought, the Court DENIES the motion without prejudice.

I. BACKGROUND

The parties and the assigned district judge are familiar with the long history of this litigation, and the undersigned will not repeat it at length here except as most relevant to the pending motion. On October 13, 2014, Plaintiffs filed a motion that Defendant/Judgment Debtor Koval Flamingo, LLC ("Koval") be subjected to a judgment debtor examination and be ordered to produce documents. Docket No. 226. Koval failed to oppose that motion, and the Court signed Plaintiffs' proposed order. See Docket Nos. 228-29. At the time set for the judgment debtor examination, Koval's counsel (Kenneth Morgan) appeared but a representative of Koval prepared to testify did not appear. See Docket No. 233.

The instant motion for sanctions was then filed by Plaintiffs. Docket No. 235.

II. STANDARDS

Rule 69(a)(2) allows parties to obtain discovery in aid of the judgment or execution as provided by the Federal Rules of Civil Procedure or by the procedure of the state where the court is located.[1] When a party or a party's officer, director or managing agent fails to obey a discovery order, the Court may issue a variety of "just orders, " including entry of case-dispositive sanctions, staying proceedings until obedience is obtained, and/or prohibiting the disobedient party from supporting or opposing certain designated claims or defenses. See Rule 37(b)(2)(A). In the context of post-judgment discovery, many of the specifically-enumerated sanctions in Rule 37(b)(2)(A) are no longer applicable or would be ineffective. See, e.g., 1st Tech., LLC v. Rational Enterps. Ltda, 2008 WL 4571057, *3 (D. Nev. July 29, 2008), adopted as modified, 2008 WL 4974580 (D. Nev. Nov. 21, 2008). Even where judgment has already been entered, however, the Court may impose the effective sanction of finding that the failure to comply with a discovery order should be treated as contempt pursuant to Rule 37(b)(2)(A)(vii).

A. Civil Contempt

"Sanctions for civil contempt may be imposed to coerce obedience to a court order, or to compensate the party pursuing the contempt action for injuries resulting from the contemptuous behavior, or both." Gen. Signal Corp. v. Donallco, Inc., 787 F.2d 1376, 1380 (9th Cir. 1986). "Compensatory awards are limited to actual losses sustained as a result of the contumacy. '" Id. (emphasis in original).

The civil contempt power of a magistrate judge regarding failure to abide by a discovery order is governed by 28 U.S.C. § 636(e). See Aldridge v. Young, 782 F.Supp. 1457, 1458 (D. Nev. 1991). Section 636(e) in its current form provides in relevant part that where:

the act constitutes a civil contempt, the magistrate judge shall forthwith certify the facts to a district judge and may serve or cause to be served, upon any person whose behavior is brought into question under this paragraph, an order requiring such person to appear before a district judge upon a day certain to show cause why that person should not be adjudged in contempt by reason of the facts so certified.

See 28 U.S.C. § 636(e)(6)(B)(iii) (2013).[2] The assigned district judge then hears the evidence to determine whether the conduct warrants punishment, and may impose contempt sanctions in the same manner and to the same extent as for a contempt committed before the district judge himself. See id.; see also In re Kitterman, 696 F.Supp. 1366, 1370 (D. Nev. 1988).

"A court has wide latitude in determining whether there has been contemptuous defiance of its order." Gifford v. Heckler, 741 F.2d 263, 266 (9th Cir. 1984). "In a civil contempt action, [t]he moving party has the burden of showing by clear and convincing evidence that the contemnors violated a specific and definite order of the court. The burden then shifts to the contemnors to demonstrate why they were unable to comply.'" F.T.C. v. Enforma Natural Prods., Inc., 362 F.3d 1204, 1211 (9th Cir. 2004) (quoting F.T.C. v. Affordable Media, LLC, 179 F.3d 1228, 1239 (9th Cir. 1999)).[3] A finding of contempt is not appropriate where the contemnors have taken "all reasonable steps" to comply with the Court's order. See, e.g., Richmark Corp. v. Timber Falling Consultants, 959 F.2d 1468, 1479 (9th Cir. 1992). A judgment debtor's failure to comply with a post-judgment discovery order may be grounds for a contempt sanction. See Baker v. Limber, 647 F.2d 912, 919 (9th Cir. 1981) ("A judgment-debtor's refusal to answer questions in a Rule 69 proceeding ...


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