Rule 37 Bars Updating Discovery After the Deadline


This opinion is worth reading and considering. The Plaintiff waited until there were only 60 days left in the discovery period to update its interrogatory answers. In those revised answers the Plaintiff sought additional damages that it had not previously sought. Plaintiff, according to the court, had the information in its possession but did not move quickly to supplement the interrogatory answers.

The result is that the court granted Defendant’s motion to bar the additional damage claims. The holding:

In short, the Court finds Plaintiff’s failure to timely supplement its answer to Interrogatory No. 9 was not substantially justified or harmless. Accordingly, the Court finds that sanctions under Rule 37 are appropriate. Plaintiff will not be allowed to seek the additional categories of damages disclosed for the first time in its December 6, 2016, supplemental answer to Interrogatory No. 9.

Given that plaintiff did update the disclosure more than 60 days before the close of discovery, this ruling is an outlier. Plaintiff may wish to appeal on this issue.

Source: BRUHN FARMS JOINT VENTURE v. FIREMAN’S FUND INSURANCE COMPANY, Dist. Court, ND Iowa 2017 – Google Scholar

Federal Judge Awards Further Sanctions For Wrongful Conduct in Defending the Sanctions Motions


This is a case arising under 28 USC § 1927, which allows a federal court to award legal fees against an attorney who “multiplies the proceedings.” In this ill-founded RICO lawsuit against BMO Harris Bank, the court awarded sanctions against three law firms. What makes the case interesting is that the court awarded further sanctions for their conduct in defending against the sanctions motion itself. The underlying wrongful conduct was the failure of the lawyers to disclose an arbitration agreement that apparently barred them from proceeding in federal court and required them to file in arbitration.

The court explains:

After providing Nguyen the Rule 11 “safe harbor” period, Wells Fargo filed the Sanctions Motion [Doc. # 9]. Wells Fargo argues that Nguyen violated Rule 11 by filing the Fourth Lawsuit, in which she assisted Khan to assert claims Nguyen knew previously had been dismissed with prejudice in the First and Third Lawsuits. Nguyen responds that she did not violate “the Federal Rules of Civil Procedure” because: Khan’s complaint filed in the First Lawsuit was not groundless; Khan’s attorney in the First Lawsuit did not explain the significance of a non-suit with prejudice to Khan; Khan was unaware that her attorney had filed a non-suit with prejudice; and counsel for Wells Fargo bullied Khan’s attorneys, including Nguyen.[10]

Nguyen’s arguments are meritless. In filing the Fourth Lawsuit, Nguyen ignored two prior dismissals with prejudice of the very claims asserted in this case. The doctrine of res judicata precludes multiple lawsuits on the same causes of action. See United States v. Davenport, 484 F.3d 321, 325-26 (5th Cir. 2007). Under the doctrine, “a final judgment on the merits bars further claims by parties or their privies based on the same cause of action.” Id. at 326 (quoting Montana v. United States, 440 U.S. 147, 153 (1979)). The Fifth Circuit determines whether two suits involve the same claim or cause of action by applying the transactional test of the Restatement (Second) of Judgments, § 24, which turns on “whether the two cases under consideration are based on `the same nucleus of operative facts.” Id. at 326 (quoting In re Southmark Corp., 163 F.3d 925, 934 (5th Cir. 1999)). Independent of any argument Nguyen may assert regarding the effect of the non-suit with prejudice of the First Lawsuit, it is undisputed that Nguyen was counsel in the Third Lawsuit, which was dismissed with prejudice on April 2, 2015, just months before Nguyen filed the Fourth Lawsuit, and which created a final judgment with respect to the claims presented in the Fourth Lawsuit. Moreover, the Petition in the Third Lawsuit alleged that the First Lawsuit had also been dismissed with prejudice. Nguyen, who filed both the Third and Fourth Lawsuits, knew or should have known the basic legal tenets of res judicata. Nevertheless, she ignored the dismissal of the Third Lawsuit.

Nguyen also has delayed resolution of the issues regarding foreclosure on the deed of trust on the Property by repeatedly filing bankruptcies on behalf of Khan without completing the reorganization or discharge process. Together with her disregard of res judicata, this course of conduct suggests an egregious pattern of harassment and purposeful unwarranted delay. See Hall v. Chase Home Fin., LLC, No. A-10-CA-206-SS, 2010 WL 2732404, at *1 (W.D. Tex. July 8, 2010) (imposing sanctions on plaintiff under Federal Rule of Civil Procedure 11 because filing of the case, which was barred by res judicata, “is clearly intended to harass the opposing parties and delay the inevitable foreclosure of property in question.”) There simply was no excuse for Nguyen’s pursuit of Khan’s duplicative and barred causes of action. Nguyen’s conduct violated Federal Rule of Civil Procedure 11 and merits the sanctions sought by Wells Fargo.

Finally, a significant financial sanction is appropriate to emphasize the seriousness of the misconduct and to deter future misconduct. See Doc. 264 at 58-59; Norelus, 628 F.3d at 1298-99. The attorney’s fees Generations incurred as a result of the renewed motion and first appeal are relatively small in context, and, as the Court has explained, the misconduct was outrageous, aspects of the defense were shocking, and sanctioned counsel show no understanding of why their actions were inappropriate. Sanctioned counsel have emphasized their nationwide experience in large class actions, e.g., Doc. 246-1 at ¶¶ 6, 8, and sanctioned counsel and their firms have appeared in courts across the country on behalf of putative class members.[4] Given the brazen nature of their original misconduct, their willingness to engage in cynical gamesmanship and deliberate obfuscation, and the risk of harm to vulnerable putative class members in cases across the country from such inappropriate litigation tactics, a small financial sanction will not be an adequate deterrent.

Source: Dillon v. BMO HARRIS BANK, NA, Dist. Court, MD North Carolina 2017 – Google Scholar

Lawyer Is Sanctioned For Filing Multiple Cases After Losing the First Case


The legal doctrine of res judicata bars a litigant from challenging a final judgment in a prior lawsuit between the same parties (or their privies). Here, in a foreclosure matter, the plaintiff filed the same or similar lawsuit against Wells Fargo four separate times. The problem, of course, is that two of the prior cases were dismissed with prejudice. The court’s reasoning is set forth below:

After providing Nguyen the Rule 11 “safe harbor” period, Wells Fargo filed the Sanctions Motion [Doc. # 9]. Wells Fargo argues that Nguyen violated Rule 11 by filing the Fourth Lawsuit, in which she assisted Khan to assert claims Nguyen knew previously had been dismissed with prejudice in the First and Third Lawsuits. Nguyen responds that she did not violate “the Federal Rules of Civil Procedure” because: Khan’s complaint filed in the First Lawsuit was not groundless; Khan’s attorney in the First Lawsuit did not explain the significance of a non-suit with prejudice to Khan; Khan was unaware that her attorney had filed a non-suit with prejudice; and counsel for Wells Fargo bullied Khan’s attorneys, including Nguyen.[10]

Nguyen’s arguments are meritless. In filing the Fourth Lawsuit, Nguyen ignored two prior dismissals with prejudice of the very claims asserted in this case. The doctrine of res judicata precludes multiple lawsuits on the same causes of action. See United States v. Davenport, 484 F.3d 321, 325-26 (5th Cir. 2007). Under the doctrine, “a final judgment on the merits bars further claims by parties or their privies based on the same cause of action.” Id. at 326 (quoting Montana v. United States, 440 U.S. 147, 153 (1979)). The Fifth Circuit determines whether two suits involve the same claim or cause of action by applying the transactional test of the Restatement (Second) of Judgments, § 24, which turns on “whether the two cases under consideration are based on `the same nucleus of operative facts.” Id. at 326 (quoting In re Southmark Corp., 163 F.3d 925, 934 (5th Cir. 1999)). Independent of any argument Nguyen may assert regarding the effect of the non-suit with prejudice of the First Lawsuit, it is undisputed that Nguyen was counsel in the Third Lawsuit, which was dismissed with prejudice on April 2, 2015, just months before Nguyen filed the Fourth Lawsuit, and which created a final judgment with respect to the claims presented in the Fourth Lawsuit. Moreover, the Petition in the Third Lawsuit alleged that the First Lawsuit had also been dismissed with prejudice. Nguyen, who filed both the Third and Fourth Lawsuits, knew or should have known the basic legal tenets of res judicata. Nevertheless, she ignored the dismissal of the Third Lawsuit.

Nguyen also has delayed resolution of the issues regarding foreclosure on the deed of trust on the Property by repeatedly filing bankruptcies on behalf of Khan without completing the reorganization or discharge process. Together with her disregard of res judicata, this course of conduct suggests an egregious pattern of harassment and purposeful unwarranted delay. See Hall v. Chase Home Fin., LLC, No. A-10-CA-206-SS, 2010 WL 2732404, at *1 (W.D. Tex. July 8, 2010) (imposing sanctions on plaintiff under Federal Rule of Civil Procedure 11 because filing of the case, which was barred by res judicata, “is clearly intended to harass the opposing parties and delay the inevitable foreclosure of property in question.”) There simply was no excuse for Nguyen’s pursuit of Khan’s duplicative and barred causes of action. Nguyen’s conduct violated Federal Rule of Civil Procedure 11 and merits the sanctions sought by Wells Fargo.

Much of the recent sanctions jurisprudence comes from the foreclosure area, an area where the litigants are often desperate and often hire non-mainstream lawyers to defend cases for which there is no defense. The result is often Rule 11 sanctions for asserting frivolous legal positions.

Edward X. Clinton, Jr.

Source: Khan v. WELLS FARGO BANK, NA, Dist. Court, SD Texas 2017 – Google Scholar

District Court Quotes Yogi Berra In Sanctioning Repeat Litigants


https://scholar.google.com/scholar_case?case=3389474079075332974&hl=en&lr=lang_en&as_sdt=400006&as_vis=1&oi=scholaralrt

This case is captioned Crooked Creek Properties, Inc. v. Ensley, pending in the Middle District of Alabama. Crooked Creek filed the case to contest to reclaim a Section 8 Housing Complex. The problem for the was that it had been filed and rejected at least four times previously.

The court first held that res judicata barred the claims of Crooked Creek. Then it awarded sanctions to the defendants, in the form of an injunction prohibiting further litigation. The court’s opinion is entertaining:

Small children usually learn fairly early on that if one parent says “no” to a request, it is best not to go behind his or her back and ask the other parent for the same thing. What the first says, goes. Res judicata is based on the same principle.[3]“The elements of res judicata, or claim preclusion, are (1) a prior judgment on the merits, (2) rendered by a court of competent jurisdiction, (3) with substantial identity of the parties, and (4) with the same cause of action presented in both suits.” Dairyland Ins. Co. v. Jackson, 566 So. 2d 723, 725 (Ala. 1990). “If these essential elements are met, any issue that was or could have been adjudicated in the prior action is barred from further litigation.” Hughes v. Allenstein, 514 So. 2d 858, 860 (Ala. 1987) (emphasis original).

Unfortunately for Defendants, this court, and everyone else involved, Crooked Creek never learned that tried and true lesson of upbringing. Like a spoiled child, Crooked Creek has not only asked both parents (state and federal) for relief; it has asked repeatedly. However, at every turn, up and down the state and federal systems—including twice by this court—judges, like exasperated parents, have responded resoundingly, “No!” Additionally, those courts and this one have explained the effect of res judicata on this case. Undeterred, Crooked Creek responds that res judicata does not apply. Well, Crooked Creek, to quote the late philosopher Yogi Berra, “It’s like déjà vu all over again.”

….

By now, Crooked Creek should recognize these findings as common themes: that the Autauga County suit resulted in a final judgment on the merits; that the Autauga County circuit court is a court of competent jurisdiction; that Crooked Creek, Richard Ensley, and Anita Liles are the same litigants from the Autauga County suit for res judicata purposes; and that this case presents the same cause of action as the Autauga County suit for res judicata purposes. At the end of the day, if Crooked Creek feels like it is re-living a nightmare, join the club. Crooked Creek has no case as it relates to this property, now or in the future. Its claim was resolved by the Autauga County circuit court, and affirmed on appeal. Defendants’ motion to dismiss is due to be granted.

The court then took time to explain the rationale for the sanctions, again in entertaining fashion:

Crooked Creek’s claims are patently frivolous. A claim is objectively frivolous if it lacks a reasonable factual or legal basis. See In re Mroz, 65 F.3d 1567, 1573 (11th Cir. 1995). This court has gone above and beyond to explain to Crooked Creek that there is no legal basis for its claims, all to no avail. Three times, this court has explained alternative bases for denying redress to Crooked Creek from the Autauga County suit, including twice on the basis of res judicata. See Crooked Creek III, 2015 WL 12940177; Crooked Creek II, 2010 WL 3629818; Crooked Creek I, 2009 WL 3644835.

Additionally, John Norris, plaintiff’s initial attorney in Crooked Creek III, should have been aware that Crooked Creek’s claims are frivolous. Whether an attorney should have been aware of his or her client’s frivolous claim(s) depends upon whether he or she would have been made aware of their frivolity upon a reasonable inquiry. See Worldwide Primates, 87 F.3d at 1254 (“In other words, we must inquire whether she would have been aware that it was frivolous if she had conducted a reasonable inquiry.”). In this case, a reasonable inquiry into the factual and legal grounds for Crooked Creek’s Complaint would have revealed the frivolous nature of Crooked Creek’s claims. A cursory review of Crooked Creek’s legal history—or even a simple Google search—would have alerted the most inauspicious lawyer about Crooked Creek’s storied history of vexatious filing related to the ownership of Danya Park Apartments.

Moreover, this court took great pains to warn Crooked Creek—and future lawyers—about the potential for sanctions if Crooked Creek brought this suit again. In Crooked Creek’s last failed attempt, this court remarked, “Plaintiff is forewarned that serious consideration will be given as to whether Rule 11 or other sanctions are appropriate if a future lawsuit is filed in this court on the same factual predicate as the two prior lawsuits.” Crooked Creek III, 2015 WL 12940177, at *2 n.3. Accordingly, John Norris should have been aware that Crooked Creek’s claims are frivolous, and therefore, sanctions are appropriate for purposes of this case.

The court then enjoined Crooked Creek from filing further litigation.

Edward X. Clinton, Jr.

http://www.clintonlaw.net

Defense Counsel Sanctioned Under Rule 37(b)(2)


This is a typical Rule 37 sanctions case in which the party fails to respond to discovery and then makes a number of excuses that do not prove compliance. After detailing the discovery deficiencies, the court explains:

In response, Defendants do not contend that they have complied fully with the Court’s discovery orders. Instead, they argue the merits of the case, and claim that (1) they have repeatedly reached out to Plaintiffs’ counsel to discuss the responses, (2) they are confused by Plaintiffs’ assertion that they have continued to object to Plaintiffs’ requests, (3) Plaintiffs “have ample discovery” because they conducted a three-hour deposition of one of the Defendants, Leon Saja, and (4) they are continuing to gather documents in order to prepare supplemental discovery responses. Resp. 2-5, ECF No. 64.

None of those points remedy the fact that Defendants have had multiple opportunities to fully comply with the Court’s orders and have failed to do so. Instead of objecting to the Discovery Master’s report when it was issued back in December 2015, Defendants have engaged in delay tactics and willful noncompliance.

Civil Rule 37(b)(2) authorizes the Court to sanction behavior when a disobedient party fails to show that noncompliance was substantially justified, or that an award of reasonable expenses and fees would be unjust. Defendants have not provided adequate reasons for the repeated noncompliance. In its earlier order, the Court warned them that “any further failure to cooperate with the progression of the case or to comply with an order of the Court will be treated as conduct tantamount to bad faith, and will result in harsher sanctions under Civil Rule 37.” The Court will issue those harsher sanctions now: (1) Defendants shall pay the Plaintiffs’ reasonable expenses, including attorney fees, incurred with the present motion, see ECF Nos. 63, 67; (2) Defendants shall pay the Plaintiffs’ reasonable expenses, including attorney fees, incurred with the Plaintiffs’ motions to compel filed on March 13, 2015, see ECF Nos. 25, 26, 30, 40, 44; (3) Defendants shall pay Plaintiffs’ share of the Discovery Master’s fees and expenses associated with his appointment and resolution of the earlier discovery issues through the report issued on December 10, 2015; and (4) Defendants shall pay the entirety of the Discovery Master’s fees and expenses associated with his upcoming assessment of the discovery issues.

If the Defendants continue to defy the Court’s orders, the Court will impose harsher sanctions, including directing that certain designated facts be taken as established for purposes of the action as to Plaintiffs’ claims, prohibiting Defendants from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence, and treating the noncompliance as contempt of the Court. See Fed. R. Civ. P. 37(b)(2).

Source: FIRNENO v. NATIONWIDE MARKETING SERVICES, INC., Dist. Court, ED Michigan 2017 – Google Scholar

District Court suggests it will sanction attorney who filed frivolous TILA claims against banks


The Truth in Lending Act allows a borrower to rescind a loan in certain circumstances. The borrower must file the action within three years of the disbursement of the loan proceeds. In this case the loan transaction occurred in July 2007 and the rescission notice was served in 2015, five years after the three-year limitations period expired.  Because the purported notice of rescission was sent long after the three-year period expired and the court granted summary judgment to the bank.

Because the lawyer for the plaintiffs had filed other lawsuits that were barred by the statute of limitations, the court entered an order requiring her to show cause why she should not be sanctioned. The court explained:

In addition to this suit, plaintiffs’ counsel, Jill J. Smith, has filed numerous actions in this district on behalf of borrowers seeking to effectuate purported rescissions pursuant to TILA, which were executed well after the three-year statute of repose expired.[2] Both this Court and Judge Robart have already sanctioned Ms. Smith for repeatedly asserting her frivolous legal theory concerning TILA rescissions and the arguments in support thereof. See Bank of New York Mellon, 2016 WL 4211529, at *3-5; Johnson v. Nationstar Mortgage, 2016 WL 6075574 at *2.

On March 10, 2016, in Johnson v. Nationstar Mortgage, this Court ordered Ms. Smith to show cause why she should not be sanctioned $5,000 pursuant to Federal Rule of Civil Procedure 11(c)(1). Specifically, the Court ordered Ms. Smith “to explain why the plain text of 15 U.S.C. § 1635(f) and the Supreme Court’s ruling in Jesinoski v. Countrywide Home Loans, 135 S. Ct. 790 (2015). . . [did] not squarely foreclose this suit.” Johnson v. Nationstar Mortgage, 2016 WL 6075574 at *2. Ms. Smith failed to respond to the Court’s show cause order, see Johnson v. Nationstar Mortgage, No. C15-1754-TSZ, docket no. 41, and despite the Court’s clear admonition that suits of this nature potentially violated Rule 11(b)(2), filed the instant action on March 31, 2016. Ultimately, on May 20, 2016, this Court sanctioned Ms. Smith $5,000 in Johnson v. Nationstar Mortgage, which she paid into the Court registry on July 27, 2016.

This sanction did not deter Ms. Smith, however, who on June 6, 2016, filed another complaint based on the same legal theory. See Johnson v. Bank of New York Mellon, No. C16-0833 JLR, docket no. 1. After ordering Ms. Smith to show cause, Judge Robart—noting the “troubling series” of frivolous TILA rescission actions filed by Ms. Smith and that prior sanctions had been ineffective in deterring her conduct—sanctioned Ms. Smith $10,000,[3] required her to reimburse any attorney’s fees or costs paid by her client, and sua sponte dismissed the case with prejudice. See Bank of New York Mellon, 2016 WL 4211529 at *3 (concluding that “Ms. Smith’s factual allegation that `the loan was never consummated’ and the legal theories underpinning that allegation violate Rules 11(b)(2) and 11(b)(3)”). Despite the sanctions levied by both this Court and Judge Robart, on September 3, 2016, Ms. Smith filed an opposition to Wells Fargo’s motion for summary judgment in this case that advances the same, comprehensively rejected arguments in defense of the same frivolous legal theory for which she has already been sanctioned.

In light of Ms. Smith’s disregard for the clear import of these sanctions, the Court ORDERS Ms. Smith to show cause why the Court should not impose additional sanctions pursuant to Federal Rule of Civil Procedure 11(c). Specifically, Ms. Smith shall explain why her contentions that plaintiffs’ notice of rescission was effective on mailing and that plaintiffs’ loan was never consummated “are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law,” see Fed. R. Civ. P. 11(b)(2), in light of the plethora of cases in which Ms. Smith has served as counsel, including Johnson v. Nationstar Mortgage and Johnson v. Bank of New York Mellon, which have thoroughly rejected these arguments.

Ms. Smith’s conduct is especially concerning given that she may be accepting money from clients in exchange for her pursuit of entirely frivolous rescission actions on their behalf. Accordingly, the Court is considering monetary sanctions of $5,000 and reimbursement of any attorney’s fees and costs paid by plaintiffs in connection with this case. In addition, because it is clear that even significant monetary sanctions have not sufficed to deter repetition of the conduct, see Fed. R. Civ. P. 11(c)(4), the Court is considering the imposition of one or both of the following non-monetary sanctions: (1) requiring Ms. Smith to file a copy of this Order, together with any order imposing sanctions, each time she files a TILA rescission action in federal court; and (2) referral to the Washington State Bar Association.

Obviously, the responding attorney may be able to defend her conduct or show that her actions were reasonable.

Source: Jenkins v. WELLS FARGO BANK, NA, Dist. Court, WD Washington 2016 – Google Scholar

Magistrate Shows Mercy and Gives Truculent Pro Se Litigant One More Chance To Comply with Discovery


No lawyer would receive this much slack from a federal judge. The case was filed by a jewelry company claiming that a designer violated its copyrights and trademarks. The defendant, who was pro se, was not a model of cooperation in the discovery process. This passage gives the reader some flavor of the problems courts have in dealing with angry pro se litigants:

On October 21, 2016, Ronaldo filed its Motion for Discovery Sanctions for Failure to Comply with Court Order [83], pointing out that Prinzo failed to produce his pre-discovery disclosures or respond to Ronaldo’s discovery requests as ordered by the Court. Ronaldo argues that the Court should impose discovery sanctions against Prinzo pursuant to Fed. R. Civ. P. 37(b).

Prinzo has frustrated the progression of this case in other ways as well. During the second case management conference held on March 30, 2016, the Court set a settlement conference for June 9, 2016. See Case Management Order [40]. On June 7, 2016, the deputy clerk called Prinzo to remind him of the conference and to request that he submit a settlement memorandum. Though the settlement conference was set at a time and place selected to minimize any inconvenience to Prinzo[3] and he had been reminded of the conference, he nevertheless failed to appear. Thereafter, the Court entered an Order [51] directing Prinzo to appear in Court on August 2, 2016, and show cause why he should not be sanctioned for failing to appear at the settlement conference.

A few weeks after the cancelled settlement conference, Ronaldo noticed Prinzo’s deposition. The deposition notice requested that Prinzo provide certain records, but Prinzo appeared at the deposition without the records. Additionally, about two hours into the deposition, he abruptly left the deposition before its conclusion. Ronaldo promptly reset the remainder of the deposition for the next day, but Prinzo did not appear.

That same day, Prinzo’s girlfriend, Janice Bintrim, appeared for her deposition. She, too, was to bring certain records with her. However, she did not do so, claiming that Prinzo instructed her not to bring them. Thereafter, Ronaldo filed a Motion for Sanctions [67], seeking sanctions as a result of Prinzo leaving the deposition, failing to appear the next day to continue the deposition, and instructing Bintrin to ignore the document request served with the deposition subpoena. The Court set a hearing on the Motion [67] for August 2, 2016, the same day as the show cause hearing. See Order [69].

The court gave Prinzo ten days to comply with discovery and pay an outstanding sanction award. In my opinion, the Magistrate showed a great deal of patience with the pro se litigant.

Source: RONALDO DESIGNER JEWELRY, INC. v. PRINZO, Dist. Court, SD Mississippi 2016 – Google Scholar