Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_06-cv-04301/USCOURTS-cand-5_06-cv-04301-6/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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United States District Court

For the Northern District of California

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*E-filed 4/30/07*

NOT FOR CITATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

SOFTWAREWORKS GROUP, INC.,

Plaintiff,

 v.

IHOSTING, INC., WEBHOSTING PLUS,

INC., and MICHAEL KOFMAN,

Defendants. 

And Related Cross-Action

_____________________________________/

Case No. C06-04301 HRL

ORDER STRIKING ANSWER

AND DISMISSING

COUNTERCLAIM

Re: Docket No. 25

Pursuant to this court's order of April 5, 2007, which required defendants to perform

specific actions by April 19, 2007 or have their answer stricken and their counterclaim

dismissed, the court finds that defendants have complied with none of the conditions set in that

order, and the court STRIKES the answer and DISMISSES the counterclaim. These actions are

explained in more detail below.

This action arises out of a business deal among web-hosting companies. Plaintiff

alleges that defendants failed to make payments due under a secured promissory note. Plaintiff

sued for breach of contract and other claims; defendants counterclaimed for similar claims. In

January 2007, defense counsel moved to withdraw from the representation of defendants, 

Case 5:06-cv-04301-HRL Document 65 Filed 04/30/07 Page 1 of 4
United States District Court

For the Northern District of California

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stating that a breakdown in attorney-client communication had occurred and that counsel had

not been able to communicate with the clients for over a month. The court was forced to

postpone a planned settlement conference when it appeared that defendants had no intention of

attending. Defendants ceased all contact with this court, and apparently, with their lawyers. 

The court temporarily stayed discovery on February 15, 2007. On March 6, 2007, the court

conditionally granted the motion to withdraw, ordering defense counsel to continue to receive

and forward documents to defendants. The court ordered the corporate defendants to

"forthwith" procure new counsel, instructed the individual defendant, Michael Kofman, that he

would be responsible for his own representation, and set the discovery process back on track. 

Defendants failed to procure new counsel, respond to discovery, arrange a settlement

conference, or in any way signify to this court that they intended to participate in this litigation. 

On April 5, 2007, the court issued an order to show cause why the court should not strike the

answer and dismiss the counterclaim. In that order, the court stated that, to avoid such

consequences, by April 19, 2007: (1) counsel for the corporate parties must file a notice of

appearance; (2) Kofman must file a notice of appearance in pro se or file a notice of appearance

by an attorney on his behalf; (3) defendants must contact Judge Trumbull's chambers to arrange

a settlement conference; and (4) defendants must respond to outstanding discovery or explain to

the court why a response has not been made. Defendants failed to respond in any way to the

April 5 order.

Defendants have violated several of the Federal Rules of Civil Procedure, and severe

sanctions are in order. First, defendants disobeyed the following court orders: (1) the court's

February 5, 2007 order to conduct a settlement conference within 60 days; (2) the court's March

6, 2007 order to obtain new counsel; and (3) the court's April 5, 2007 order to show cause. Rule

16(f) of the Federal Rules of Civil Procedure states that if a party fails to obey a scheduling or

pretrial order, the judge may make any of the orders provided in Rule 37(b)(2)(B), (C), or (D). 

Rule 37(b)(2)(C) authorizes court orders striking out pleadings and dismissing actions. This

alone would be authority enough for the court to strike defendants' answer and dismiss their

counterclaim.

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United States District Court

For the Northern District of California

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Defendants have also violated the standards of Rule 37 itself by failing to obey this

court's April 5, 2007 order to either respond to all outstanding discovery, with a copy of the

response submitted to the court by April 19, 2007, or by that same date explain to the court why

they have not complied. As a discovery sanction under Rule 37(b)(2)(C), this court is entitled

to strike the answer and dismiss the counterclaim.

Finally, Rule 41(b) authorizes this court to dismiss the counterclaim for failure to

prosecute and for failure to comply with the Federal Rules and court orders. Courts in the Ninth

Circuit evaluate the following factors when considering dismissal, with prejudice, for failure to

prosecute or failure to comply with court orders: “(1) the public's interest in expeditious

resolution of litigation; (2) the court's need to manage its docket; (3) the risk of prejudice to the

defendants; (4) the public policy favoring disposition of cases on their merits and (5) the

availability of less drastic sanctions.” See Henderson v. Duncan, 779 F.2d 1421, 1423 (9th

Cir.1986); Ferdik v. Bonzelet, 963 F.2d 1258, 1260-61 (9th Cir. 1992). Here, the first two

factors, as always, favor dismissal. Plaintiff has expressed concern that it will be prejudiced by

further delay in this action because it needs to protect its position with respect to other creditors

of defendants. Thus, the third factor favors dismissal of the counterclaim. Disposition on the

merits appears unlikely, as defendants are failing to move the case along towards a merits-based

outcome. Finally, the court attempted less drastic sanctions in its order of April 5, 2007. The

court even gave defendants a clear warning that their counterclaim would be dismissed. The

warning in the order to show cause has gone unheeded; more drastic sanctions are now in order.

Pursuant to Rules 16(f), 37(b)(2)(C), and 41(b), defendants' answer is hereby stricken

out, and the counterclaim is dismissed with prejudice (Docket No. 25). 

IT IS SO ORDERED.

Dated: 4/30/07 /s/ Howard R. Lloyd 

HOWARD R. LLOYD

UNITED STATES MAGISTRATE JUDGE

Case 5:06-cv-04301-HRL Document 65 Filed 04/30/07 Page 3 of 4
United States District Court

For the Northern District of California

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THIS IS TO CERTIFY THAT A COPY OF THIS ORDER WILL BE ELECTRONICALLY

MAILED TO:

Lael D. Andara landara@ropers.com, aslanlair@ropers.com; mmcpherson@ropers.com;

lkoozmin@ropers.com 

Robert P. Andris randris@ropers.com, lkoozmin@ropers.com; mmcpherson@ropers.com 

Robert Lloyd Maines maines@robertmaineslaw.com, jmills@OMM.com 

Counsel are responsible for transmitting this order to co-counsel who have not signed up

for e-filing.

Dated: 4/30/07 /s/ JMM 

 Chambers of Magistrate Judge Howard R. Lloyd

Case 5:06-cv-04301-HRL Document 65 Filed 04/30/07 Page 4 of 4