Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-02494/USCOURTS-caed-2_04-cv-02494-1/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 28:1442 Petition for Removal

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1 Because oral argument will not be of material

assistance, the court orders the matter submitted on the briefs. 

E.D. Cal. L.R. 78-230(h).

2 The court treats the government’s latter “request” as a

(continued...)

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

CAL FRUIT INTERNATIONAL, INC.,

NO. CIV. 04-2494 FCD/KJM

Plaintiff,

MEMORANDUM AND ORDER

JEANNE SPAICH; INTERNAL

REVENUE SERVICE;

Defendants.

----oo0oo----

This matter is before the court on interpleader defendant

Internal Revenue Service’s (“IRS” or “the government”) motion to

strike1 interpleader defendant Jeanne Spaich’s (“Spaich”) claim

to the interplead funds pursuant to Federal Rule of Civil

Procedure 37(d), and to disburse the funds at issue to the

government.2 In so moving, the government asks the court to

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2(...continued)

motion under Federal Rule of Civil Procedure 56.

impose the ultimate sanction of dismissal of Spaich’s claim

because she twice failed to attend her properly noticed and

scheduled deposition. 

BACKGROUND

Gavrillo Spaich, Jeanne’s father, sold a load of prunes to

plaintiff Cal Fruit International, Inc. (“plaintiff”). The IRS

then levied plaintiff in September 2004 to collect the $89,315.60

owed by plaintiff to CalPrune, a corporation owned by Gavrillo

Spaich, for the prunes. Rather than pay the IRS levy, plaintiff

filed this interpleader action, depositing said funds with the

court and seeking a determination as to who is entitled to the

funds. Specifically, plaintiff alleges that it does not know the

identity of the seller of the prunes, whether it was CalPrune

(Gavrillo Spaich) or Jeanne Spaich. Both the government and

Spaich filed claims to the interplead funds. 

The government’s claim arises from various federal tax

assessments against CalPrune. Spaich’s claim, on the other hand,

arises from her allegation that she is the owner of the prunes

sold to plaintiff and that her father was merely acting as her

agent; therefore, she contends the funds should be distributed to

her rather than go to pay the IRS’ tax levy. 

The original deadline to complete discovery in this case was

October 28, 2005. (Pre-Trial Sch. Order, filed May 2, 2005.) 

The government noticed Spaich’s deposition for August 19, 2005,

after the parties mutually selected that date. On the day of the

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deposition, however, Spaich inexplicably failed to appear. 

Acknowledging her failure to provide adequate notice to the

government, her counsel reimbursed the government for its

expenses associated with the deposition. 

Thereafter, Spaich’s counsel communicated with the

government in an effort to resolve the matter short of any

further depositions. Spaich’s counsel provided the government

with information regarding Spaich’s position that all of the

relevant liabilities had been paid prior to the IRS’ levy on the

subject funds and/or all such liabilities had been subsequently

paid. Spaich’s counsel and the government’s counsel engaged in a

series of e-mails on this issue. A resolution of the matter was

not reached, and the parties agreed to extend the discovery

deadline to November 30, 2005, which the court approved. 

Spaich’s deposition was then mutually scheduled for November 17,

2005. Yet, on the day of the deposition, she again failed to

appear, allegedly due to work commitments. Her counsel again

reimbursed the government its expenses. 

STANDARD

Federal Rule of Civil Procedure 37(d) gives the court

discretion, if a party fails to attend a properly noticed

deposition, to sanction the party failing to appear for noncompliance. See Fed. R. Civ. Proc. 37(b)(2)(A)-(C). Sanctions

include, but are not limited to: limiting evidence, closing

discovery, striking the pleadings, dismissing a claim, or entry

of a default judgment. Id.

 Before dismissing a case for non-compliance with Rule 37,

the court must examine the following factors: (1) the public’s

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interest in the expeditious resolution of litigation; (2) the

court’s docket concerns; (3) the risk of prejudice to the

defendant; (4) the judicial policy favoring disposition of cases

on the merits; and (5) the availability of a less drastic

sanction. Payne v. Exxon Corp., 121 F.3d 503, 507 (9th Cir.

1997). Striking the claim is a severe penalty and should only be

assessed as a sanction in extreme circumstances, especially when

such a remedy is dispositive of the action. See Thompson v.

Housing Authority, 782 F.2d 829, 831 (9th Cir. 1986). 

ANALYSIS

Upon consideration of the factors outlined above, the court

finds that Rule 37 sanctions, any one of which would have the

effect of entry of judgment in favor of the government, are not

merited at this time. The government requests dismissal because

Spaich twice failed to appear at her scheduled deposition. While

the government cites several cases where parties’ claims were

stricken for failure to appear at depositions, those cases are

inapposite as they involve willful conduct in violation of direct

court orders to appear, after a nearly complete failure to

meaningfully participate in the discovery process. See Creative

Gifts, Inc., v. UFO, 235 F.3d 540, 544 (10th Cir. 2000);

Viswanathan v. Scotland County Bd. of Educ., 165 F.R.D. 50, 53-

54, aff’d 76 F.3d 377 (4th Cir. 1996); In re Sumitomo Copper

Litigation, 204 F.R.D. 58, 60-61 (S.D.N.Y. 2001). No such

“complete failure” of the discovery process has occurred here.

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 Plaintiff has not disobeyed direct court orders. She has,

however, failed to appear at two noticed depositions despite the

selection of a mutually convenient date and her counsel’s

admonitions to appear. While wholly improper under the rules,

the court does not dismiss her claim to the subject funds. 

First, it is noteworthy, that during this time, her counsel

sought to resolve the matter short of her deposition. Although

ultimately unsuccessful, such good faith efforts are relevant to

the court’s consideration of this motion. 

Additionally, while the court acknowledges that the

government was not required to seek a court order or other

sanctions prior to filing the instant motion, the court also

considers this fact in its analysis. Had the court previously

ordered her appearance, and she then failed to appear, the grant

of a Rule 37 motion would likely have been warranted. 

Finally, the court considers the serious questions involved

in this case regarding who is entitled to the interplead funds

and in what amount. For instance, the government, in its initial

calculations asserted that the amount owed by CalPrune to the

government was more than $550,000.00. Admitting error in that

first calculation, the government in a later correction filed

with the court, indicated the relevant amount was $120,000.00. 

(Praecipe to Gov’t Reply, filed Jan. 6, 2006.) Spaich argues

that the amount owed is substantially less than $120,000.00 and

indeed may be zero. In light of these significant issues, Spaich

should be given one last opportunity to appear at her deposition. 

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Therefore the court reopens discovery, which closed on

November 30, 2005, and orders Spaich’s deposition. Said

deposition shall take place within 30 days of the date of this

order. The government shall have 45 days from the date of the

deposition to file a supplemental brief regarding its substantive

claim to the funds; Spaich shall have 20 days thereafter to file

a supplemental opposition; the government shall file any reply

within 10 days thereof. The court will set the matter for

hearing, if necessary, upon review of the supplemental briefs. 

Spaich is admonished that this is her final opportunity to

appear for her deposition; if she does not appear, the court will

grant the government’s motion to strike and pursuant thereto,

disburse the subject funds to the government.

CONCLUSION

For the foregoing reasons, the government’s motion to strike

Spaich’s interpleader claim is DENIED. However, as a result of

the court’s ordering the deposition of Spaich, the court defers

ruling on the government’s motion for disbursement of the

interplead funds. Plaintiff’s motion for attorney’s fees is

likewise deferred until this case is resolved on the merits, as

the imposition of attorney’s fees against the interplead funds

depends on which interpleader defendant prevails. See Abex Corp. 

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v. Ski’s Ener., Inc., 748 F.2d 513, 516 (9th Cir. 1984). 

IT IS SO ORDERED.

DATED: February 15, 2006

/s/ Frank C. Damrell Jr. 

FRANK C. DAMRELL, Jr.

UNITED STATES DISTRICT JUDGE

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