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U.S. Bank N.A. v. SFR Investments Pool 1, LLC

United States District Court, D. Nevada

February 2, 2018

U.S. BANK N.A., Plaintiffs,
SFR INVESTMENTS POOL 1, LLC, et al., Defendants.

          ORDER (DOCKET NOS. 79, 84, 93)


         Plaintiff U.S. Bank and its attorneys at Wright, Finlay & Zak have decided to engage in mass litigation over home foreclosures initiated by homeowners associations. “[W]hen parties choose to undertake mass litigation, they must make the proper preparations for doing so.” Wells Fargo Bank, N.A. v. SFR Invs. Pool 1, LLC, No. 2:16-cv-2726-RFB-NJK, 2017 U.S. Dist. Lexis 150715, *3 (D. Nev. Sept. 18, 2017). That includes properly staffing cases to ensure that deadlines are met. Id. Such was obviously not the case here, as U.S. Bank and its attorneys now acknowledge a “cascading series” of failures to comply with Court-ordered deadlines.

         The Court herein addresses those failures in the context of the pending order to show cause, the pending motion to reopen discovery, and the pending motion for summary judgment.

         I. BACKGROUND

         As noted above, this is one of hundreds of cases being litigated concerning the impact of a home foreclosure initiated by an HOA on the interest in that home by the mortgagor bank. In this particular case, U.S. Bank sued the wrong HOA, a mistake that was discovered with approximately 45 days remaining in the discovery period. Docket No. 49 (motion to be excused from settlement conference filed by the improperly named HOA on March 16, 2017, identifying “recent[]” discovery of being improperly named); Docket No. 48 at 4 (setting discovery cutoff at May 1, 2017). U.S. Bank did not seek an extension of the discovery deadlines at that time based on the revelation that it sued the wrong HOA.

         Given an imminent settlement conference, however, the Court set a hearing to discuss the issue. Docket No. 56. At that hearing held on March 21, 2017, U.S. Bank expressed its intention to seek amendment of its complaint to name the correct HOA. Hearing Tr. (Mar. 21, 2017) at 9:04-9:05 a.m.[1] On April 11, 2017, U.S. Bank filed a stipulation to allow it to file a second amended complaint identifying the correct HOA “within two days of approval of this stipulation” and further that “U.S. Bank shall serve Green Valley South Owners Association No. 1 with a summons and a copy of the Second Amended Complaint within ten (10) days of approval of this stipulation and order.” Docket No. 64 at 2. On April 14, 2017, Chief United States District Judge Gloria M. Navarro granted that stipulation, establishing the deadline to file the second amended complaint as April 17, 2017 (as the deadline fell on a Sunday), and establishing the deadline for service to be completed as April 24, 2017. Docket No. 65 at 2. The stipulation did not request an extension of discovery deadlines, and the resulting order did not provide any such extension.

         Despite stipulating to the deadlines, U.S. Bank did not file the second amended complaint by the deadline ordered and did not serve the second amended complaint by the deadline ordered. U.S. Bank also never sought an extension of those deadlines. Moreover, U.S. Bank did not seek an extension of the discovery cutoff and, instead, simply allowed it to lapse as scheduled on May 1, 2017. Following the close of discovery, on May 2, 2017, Chief Judge Navarro stayed this case pending resolution of appeals involving relevant legal issues. Docket No. 66.

         On November 7, 2017, Chief Judge Navarro lifted the stay and, because discovery had already closed, ordered the filing of dispositive motions within 21 days. Docket No. 77. Defendant SFR filed a motion for summary judgment as ordered. Docket No. 79. U.S. Bank did not file a dispositive motion, did not file a request to extend that deadline, and, instead, on the 21st day after that order was issued simply filed its untimely second amended complaint. Docket No. 78.[2], [3] Another three weeks later, on December 19, 2017 (i.e., six weeks after the stay was lifted), U.S. Bank then filed a motion to reopen discovery and to reopen the deadline for dispositive motions in light of its untimely second amended complaint. Docket No. 84.[4] Following the filing of Defendant SFR's response to the motion to reopen, the Court further issued an order for U.S. Bank and its attorneys to show cause why they should not be sanctioned in light of their violation of Court-ordered deadlines. Docket No. 93.


         The Court will first address the outstanding order to show cause. U.S. Bank and its attorneys have created a quagmire. They sued the wrong HOA. They failed to comply with the Court-ordered deadlines (that they had proposed) to sue and serve the right HOA. They allowed the discovery period to expire without seeking relief from the discovery cutoff. They ignored Chief Judge Navarro's order setting a deadline to file dispositive motions without seeking relief from that deadline, and instead filed their untimely second amended complaint without acknowledging its untimeliness or seeking a retroactive extension of the Court-ordered deadline. They waited three more weeks to file a motion to reopen the discovery cutoff and the dispositive motion deadline. They have engaged in this course of conduct at the expense of judicial resources and at the expense of SFR's resources, and have threatened the integrity of the Court's orders.

         As a result, the Court ordered U.S. Bank and its attorneys (Edgar Smith, Dana Nitz and Patrick Davis) to show cause why they should not be sanctioned. Docket No. 93. U.S. Bank provided a response, supported by a declaration from Mr. Davis. Docket Nos. 94, 94-1. No. declaration was submitted by Mr. Smith or Mr. Nitz. For the reasons discussed below, the Court finds the imposition of sanctions appropriate against Mr. Davis, Mr. Smith, and Mr. Nitz.

         A. STANDARDS

         “Orders are not suggestions or recommendations, they are directives with which compliance is mandatory.” Gfeller v. Doyne Med. Clinic, Inc., No. 2:14-cv-01940-JCM-VCF, 2015 WL 5210392, at *8 (D. Nev. Sept. 3, 2015) (citing Chapman v. Pacific Tel. & Tel. Co., 613 F.2d 193, 197 (9th Cir. 1979) and Weddell v. Stewart, 261 P.3d 1080, 1085 & n.9 (Nev. 2011)). There are several sources of legal authority by which federal courts enforce their orders. Most pertinent here, Rule 16(f) of the Federal Rules of Civil Procedure requires compliance with any “scheduling or other pretrial order.” Fed.R.Civ.P. 16(f)(1)©. Rule 16(f) is “broadly remedial and its purpose is to encourage forceful judicial management.” Sherman v. United States, 801 F.2d 1133, 1135 (9th Cir. 1986) (per curiam).

         Litigants have an “unflagging duty to comply with clearly communicated case-management orders.” Martin Family Trust v. Heco/Nostalgia Enters. Co., 186 F.R.D. 601, 604 (E.D. Cal. 1999). Rule 16(f) applies regardless of whether the non-compliance with the court order was intentional. See, e.g., Lucas Auto. Eng'g, Inc. v. Bridgestone/Firestone, Inc., 275 F.3d 762, 769 (9th Cir. 2001). Similarly, “[i]t is firmly established that sanctions may be imposed for a party's unexcused failure to comply with a Rule 16 order, even if that failure was not made in bad faith.” Hologram USA, Inc. v. Pulse Evolution Corporation, No. 2:14-cv-0772-GMN-NJK, 2016 WL 2757377, at *2 (D. Nev. May 11, 2016) (Navarro, C.J.) (collecting cases).

         Courts do not invoke Rule 16(f) to enforce their orders for sport. Cf. Dela Rosa v. Scottsdale Mem'l Health Sys., Inc., 136 F.3d 1241, 1244 (9th Cir. 1988) (“We prefer not to spend time lecturing and cajoling violators into compliance through the imposition of sanctions”). Nonetheless, violations of orders setting deadlines “involve a matter most critical to the court itself: management of its docket and the avoidance of unnecessary delays in the administration of its cases.” Martin Family Trust, 186 F.R.D. at 603 (quoting Matter of Sanction of Baker, 744 F.2d 1440, 1441 (10th Cir. 1984) (en banc) (internal quotations omitted)). “Part of the purpose of the sanctioning power-the power at issue here-is to control litigation and preserve the integrity of the judicial process.” Nick v. Morgan's Foods, Inc., 270 F.3d 590, 594 (8th Cir. 2001). Judges have a responsibility to enforce the directives laid down for the case:

Rules are rules-and the parties must play by them. In the final analysis, the judicial process depends heavily on the judge's credibility. To ensure such credibility, a [magistrate] judge must often be firm in managing crowded dockets and demanding adherence to announced deadlines. If he or she sets a reasonable due date, parties should not be allowed casually to flout it or painlessly escape the foreseeable consequences of noncompliance.

Legault v. Zambarano, 105 F.3d 24, 28-29 (1st Cir. 1997) (citation omitted); see also Rice v. Barnes, 201 F.R.D. 549, 551 (M.D. Ala. 2001) (“The court fully understands the pressures of practicing law; however, the court cannot allow attorneys to flout deadlines and escape the foreseeable consequences of doing so”). As the Ninth Circuit has emphasized, a court order setting deadlines “is not a frivolous piece of paper, idly entered, which can be cavalierly disregarded by counsel without peril . . . . Disregard of the order would undermine the court's ability to control its docket . . . and reward the indolent and the cavalier.” Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 610 (9th Cir. 1992) (internal quotations and citations omitted).

         When a court determines that Rule 16(f) has been violated, it has broad discretion in fashioning an appropriate sanction. See, e.g., Official Airline Guides, Inc. v. Goss, 6 F.3d 1385, 1397 (9th Cir. 1993); see also Local Rule IA 11-8 (the Court may impose “any and all appropriate sanctions on an attorney” who violates any order). Violations of orders are “neither technical nor trivial, ” Martin Family Trust, 186 F.R.D. at 603, and can have severe ramifications. Rule 16(f) itself provides that courts may issue “any just orders, ” including those authorized by Rule 37(b)(2)(A)(ii)-(vii), which include the initiation of contempt proceedings and entry of case-dispositive sanctions. See Fed. R. Civ. P. 16(f)(1); see also Malone v. U.S. Postal Serv., 833 F.2d 128, 130-33 (9th Cir. 1987) (affirming dismissal sanction). Rule 16(f) also authorizes the payment of the attorneys' fees and costs incurred as a result of the non-compliance with the Court order. See Fed. R. Civ. P. 16(f)(2). In addition, while not expressly enumerated, the imposition of court fines is within the scope of the “just orders” permitted by Rule 16(f). See, e.g., Nick, 270 F.3d at 595-96. In determining the appropriate sanction, a primary objective is to deter similar misconduct. See, e.g., Martin Family Trust, 186 F.R.D. at 604. The Court also considers, inter alia, the resources wasted by the opposing party. See, e.g., Fed.R.Civ.P. 16(f)(2).

         B.Mr. ...

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