Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_10-cv-01034/USCOURTS-azd-2_10-cv-01034-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 23:1441 Contract Real Estate

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Hereinafter “this Court.” For ease of reference, the presiding District Judge will be

referred to as “the Court.”

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Suenos, LLC, an Illinois limited liability

company, 

Plaintiff, 

vs.

Diane Goldman, a New Jersey individual,

et al., 

Defendants. 

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Case No. CV 10-01034-TL (MHB)

REPORT AND RECOMMENDATION

TO THE HONORABLE TIM LEONARD, UNITED STATES DISTRICT JUDGE:

On November 8, 2013, presiding U.S. District Judge Tim Leonard, referred this matter

to undersigned,1

 pursuant to 28 U.S.C. §636(b) to conduct a hearing and issue a Report and

Recommendation on whether Thomas R. Nolasco, attorney for Defendant Diane Goldman,

should be held in contempt for violating the Settlement Conference Order. (Doc. 495, at 3.)

On November 25, 2013, this Court held a Show Cause hearing, at which Thomas R. Nolasco

(hereinafter “Nolasco”) appeared representing himself, and Spencer Marks and Jonathan

Rosen appeared representing Plaintiff. (Doc. 502.)

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BACKGROUND

Before trial, on October 29, 2013, this case was referred to this Court for the purpose

of conducting a settlement conference. (Doc. 273.) This Court then issued its standard

settlement conference order, which read, in pertinent part:

The purpose of the Settlement Conference is to facilitate settlement of this

case, if that is appropriate. It will be conducted in such a manner as not to

prejudice any party in the event a settlement is not reached. To that end, the

offer and demand, if any, communicated to the undersigned in confidence will

be kept confidential and will not be disclosed to any adverse party absent

express consent to do so. Rule 408, Federal Rules of Evidence, applies to all

aspects of the Settlement Conference. All communications and information

exchanged in and during the settlement process, not otherwise discoverable,

will not be admissible in evidence for any purpose and shall not be used for

any purpose outside the Settlement Conference itself. At the conclusion of the

Settlement Conference, all documents submitted and exchanged by the parties

shall be returned, destroyed, or otherwise disposed of in the manner directed

by the Settlement Judge upon the request of any party.

(Doc. 274, at 1.)

The order also directed the parties to exchange settlement conference memorandums

prior to the settlement conference, and that the originals of the memorandums be provided

to this Court, but that they NOT be filed with the Clerk of Court. (Doc. 274, at 4.) The order

also required that the settlement conference memorandums include each party’s position on

settlement, “including the amount that the Plaintiff is currently willing to accept and

Defendant(s) is/are willing to offer and the history of past settlement discussions, offers and

demands.” (Id., at 5.) 

The settlement conference was held on November 13, 2013, but the case did not settle.

(Doc. 275.) Prior to trial, the Court found in favor of Plaintiff on its claim that Defendant

Goldman breached the parties’ contract, but that neither party was entitled to judgment of law

on Defendant Goldman’s mitigation defense. (Doc. 248.) The case proceeded to trial, and

at its conclusion, the Court granted Plaintiff’s motion for judgment as a matter of law against

Defendant Lawyers Title on Plaintiff’s breach of fiduciary duty claim. (Doc. 412, at 2.) The

jury then returned a verdict in favor of Plaintiff on the breach of contract against Defendant

Goldman in the amount of zero dollars as direct damages and $327, 946.40 as consequential

damages: the jury reduced that amount by $318,515.88 representing its finding as to

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Goldman’s mitigation of damages defense, leaving the total amount of the damages as

$9,430.52. (Doc. 417.) The jury also awarded $85,000.00 against Defendant Lawyers Title

in the amount of $85,000.00. (Id. at 2.) On February 5, 2013, judgment was entered in

accordance with the Court’s findings and the jury verdict. (Doc. 422.)

Shortly after judgment was entered, Defendant Lawyers Title filed a Motion to

Prohibit (Plaintiff) from Submitting Evidence or Argument Related to the Parties’ Settlement

Conference. (Doc. 424.) Lawyers Title sought an order from the Court that Plaintiff be

prohibited from including in any of its “anticipated filings” any reference to communications

or materials exchanged between the parties in connection with the November 13, 2012,

settlement conference. (Id.) Lawyers Title cited this Court’s settlement conference order in

support of its request. Defendant Goldman did not join in this motion, and Plaintiff never

filed a response.

On February 19, 2013, Goldman filed a Motion for Award of Attorney Fees, arguing

that Goldman should be considered the prevailing party under the contract, considering the

“totality of the litigation” or “percentage of success” of the parties. (Doc. 427, at 3.) 

On February 20, 2013, Plaintiff filed a Motion for Attorney Fees Against Diane

Goldman, and argued to the contrary, that Plaintiff was the prevailing party even though

Plaintiff did not recover the “full measure of relief it request[ed].” (Doc. 432, at 3.) On

March 11, 2013, Goldman filed her response to Plaintiff’s motion. (Doc. 448.) In her

response, she again asserted that she should be considered the prevailing party, because,

“[u]nder Arizona law, the prevailing party is the one that has achieved the highest percentage

of success with respect to the lawsuit as a whole,” citing Schwartz v. Farmers Ins. Co. of

Arizona, 166 Ariz. 33, 38, 800 P.2d 20, 25 (App. 1990). (Id., at 1.) Goldman attached a

copy of Plaintiff’s Settlement Conference Memorandum to establish, in support of her

position, that Plaintiff had rejected a settlement offer of $100,000.00, which was over 10

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The Court ordered the Clerk of Court to strike the exhibit on November 8, 2013.

(Doc. 495.)

3

The Court did not order this exhibit struck from the docket. This Court will

recommend that the Court do so.

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times the amount Plaintiff was awarded at trial.2

Goldman also argued in her response that Plaintiff’s request for over $450,000.00 in

attorney fees was unreasonable. She referred to Plaintiff’s Settlement Conference

Memorandum to establish, in support of her position, that Plaintiff had incurred $267,624.48

in attorney fees as of the date of the settlement conference, and projected expending an

estimated $13,200-$25,800.00 through trial. (Doc. 448, at 4.)

Plaintiff filed a Reply to Goldman’s response on April 4, 2013. In its Reply, Plaintiff

did not state an objection to Goldman’s reference to, or the filing of their Settlement

Conference Memorandum. (Doc. 459.)

On April 5, 2013, Goldman filed a Supplemental Motion for Attorney Fees and Costs,

arguing as she did in her response to Plaintiff’s motion for attorney fees, that Plaintiff’s

rejection of Goldman’s settlement tender and projection of attorney fee costs at the settlement

conference were relevant to the issue of the prevailing party determination and

reasonableness of the fees, and again attached a copy of Plaintiff’s Settlement Conference

Memorandum as an exhibit.3

 (Doc. 463.) On April 23, 2013, Plaintiff filed a response to

Goldman’s motion and supplemental motion for attorney fees, and in that response, again did

not state an objection to Goldman’s reference to settlement conference communications and

the Settlement Conference Memorandum. (Doc. 468.) On August 21, 2013, the Court

denied Goldman’s Motion for Attorney Fees. (Doc. 479.)

During the Show Cause hearing, Nolasco admitted that when he filed his pleadings

relating the attorney fee dispute, he did not “go back and read this Court’s settlement

conference order,” and that when he received the Order to Show Cause “it made [him] feel

ill and regretful for having done that.” (Doc. 509, at 6.) Nolasco also argued his good faith

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belief that Arizona case law and Rule 408, Federal Rules of Evidence, permit reference to

settlement negotiations in attorney fee disputes under limited circumstances, and that those

limited circumstances applied in this case. (Id., at 9-11.) Nolasco also acknowledged that

co-defendant Lawyers Title had filed a motion to prohibit Plaintiff from referring to

settlement negotiations, but pointed out that the motion was directed toward Plaintiff, and

that Plaintiff did not respond to it. Nolasco asserted that if Plaintiff had objected, he would

have “taken action, whatever [he] needed to do, file it under seal, ...” (Id., at 8.) Nolasco

also asserted that had he gone back and read this Court’s settlement conference order, he

would have filed a motion for leave to file Plaintiff’s Settlement Conference Memorandum,

or filed it redacted or under seal. (Id., at 9.) Nolasco apologized to the Court. (Id., at 11.)

Plaintiff stated at the hearing that the reason Plaintiff did not respond to the motion

by Lawyers Title, was that “it was just obvious that a – under 408 [] you cannot put any of

that information before the Court.” (Doc. 509, at 13.) Plaintiff also explained its lack of

objection to Goldman’s settlement conference references was to avoid giving the reference

“any oxygen,” believing it to be inappropriate and requiring additional attorney fees to move

to strike the reference. (Id.) Plaintiff portrayed Nolasco’s position as one of “asking for

forgiveness before asking for permission.” (Id., at 12.)

At the conclusion of the Show Cause hearing, this Court ordered briefing by the

parties. Nolasco filed his Brief Concerning Order to Show Cause Why He Should Not be

Held in Contempt for Violating Settlement Conference Order on December 2, 2013. (Doc.

507.) Plaintiff filed in Response in Support of Contempt Finding Against Attorney Nolasco

on December 12,2013, (Doc. 520), and Nolasco filed a Reply on December 16, 2013. (Doc.

527.)

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LEGAL STANDARD

A party commits civil contempt by disobeying “a specific and definite court order by

failure to take all reasonable steps within the party’s power to comply.” Reno Air Racing

Ass’n, Inc. v. McCord, 452 F.3d 1126, 1130 (9th Cir. 2006) (citation omitted). The contempt

“need not be willful, and there is no good faith exception to the requirement of obedience to

a court order.” In re Dual-Deck Video Cassette Recorder Antitrust Litigation, 10 F.3d 693,

695 (9th Cir. 1993) (internal quotes and citation omitted). If a party’s actions are based upon

a “good faith and reasonable interpretation of the court’s order,” then that party should not

be held in contempt. (Id.) (citation omitted). Contempt must be established by clear and

convincing evidence. Wolfard Glassblowing Co. v. Vanbragt, 118 F.3d 1320, 1322 (9th Cir.

1997); In re Dual-Deck, 10 F.3d at 695. “If the purpose of the court’s order is to punish past

defiance and to vindicate the court’s judicial authority, it is a criminal sanction,” ... criminal

contempt must be established beyond a reasonable doubt. Whittaker Corp. v. Execuair

Corp., 953 F.2d 510, 517 (9th Cir. 1992). The purpose of civil contempt sanctions, in

contrast, is to “coerce the defendant into compliance with the court’s order, and to

compensate the complainant for losses sustained.” Id. Civil contempt sanctions are “wholly

remedial,” and a sanction is not a proper civil contempt sanction if it “does not permit [the

contemnor] to purge itself of the contempt.” Id.

In addition to the court’s contempt power, Rule 16(f), Fed. R.Civ. P., confers authority

upon the court to impose sanctions on a party or attorney for failing to obey a scheduling or

other pretrial order. Local Rule 83.1(f) also provides that the court may, “upon its own

initiative” impose appropriate sanctions upon an attorney who, “without just cause” violates

or fails to conform to the Federal Rules of Civil Procedure or any order of the court. The

court may, under this Rule, order a sanction that is just under the circumstances, which may

include the imposition of a fine, or an order imposing costs and attorney fees. “District

courts have broad discretion in interpreting and applying their local rules.” Simmons v.

Navajo County, Ariz., 609 F.3d 1011, 1017 (9th Cir. 2010), citing Miranda v. Southern

Pacific Transp. Co., 710 F.2d 516, 521 (9th Cir. 1983). The court has “inherent power to

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impose a variety of sanctions to regulate its docket, promote judicial efficiency and deter

frivolous filings.” Resolution Trust Corp. v. Dabney, 73 F.3d 262, 267 (10th Cir. 1995),

citing Chambers v. NASCO Inc., 501 U.S. 32, 50 (1991). “Sanctions are appropriate against

a party who violates a court settlement order that the person with settlement authority attend

the settlement conference.” Official Airline Guides, Inc. v. Goss, 6 F.3d 1385, 1396 (9th Cir.

1993).

APPLICATION OF LAW TO FACTS

This Court’s settlement conference order clearly directed the parties not to file

settlement conference memoranda with the Clerk of Court. The order also directed that all

communications and information exchanged in and during the settlement process not be used

for any purpose outside the settlement conference, and that Rule 408, Federal Rules of

Evidence, applies to all aspects of the settlement conference. Rule 408 provides that

evidence of settlement discussions “is not admissible - on behalf of any party - either to

prove or disprove the validity or amount of a disputed claim or to impeach by a prior

inconsistent statement or a contradiction.” Fed. R. Evid. 408(a).

This Court finds that Nolasco violated the terms of the settlement conference order

by referencing the settlement offer made by Goldman during the settlement conference, and

by attaching to his pleadings Plaintiff’s Settlement Conference Memorandum. This Court

also finds that Plaintiff was not harmed by this violation. First, Plaintiff did not object,

despite having two opportunities to do so, until the Court entered its Order to Show Cause.

Plaintiff’s explanation that it did not want to draw attention to the inappropriate references,

and did not want to incur additional attorney fees by filing a motion to strike is not

persuasive. Plaintiff does not explain how additional attention to the references would have

caused tangible harm. Second, the attorney fees expended by Plaintiff in electing to weigh

in and brief the contempt issue in light of the lack of discernible damages, belies its claim to

a financially conservative approach. 

This Court also finds that Nolasco may reasonably have believed, at the time he

violated the terms of the settlement conference order, that his references to prior settlement

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offers and Plaintiff’s projected attorney fees were relevant to his claims that Goldman was

the “prevailing party” under Arizona law and that the attorney fees claimed by Plaintiff were

unreasonable. Nolasco argued that the judgment of $9,430.52 that Plaintiff had finally

obtained was less than 1%of the damages that Plaintiff originally sought and therefore

Goldman should be considered the prevailing party. (Doc. 448, at 5.) Nolasco cited

Schwartz v. Farmers Ins. Co. Of Arizona, 166 Ariz. 33; 800 P.2d 20 (App. 1990), and Berry

v. 352 E. Virginia, L.L.C., 228 Ariz. 9; 261 P.3d 784 (App. 2011), in support of this notion.

Nolasco further cited Pioneer Roofing Co. v. Mardian Const. Co., 152 Ariz. 455; 733 P.2d

652 (App. 1986), for the proposition that in a Plaintiff’s attorney fee claim under A.R.S. §12-

341.01 a court may apply a “percentage of success formulation in determining the amount

of fees awarded.” (Doc. 448, at 8.) A review of this authority persuades this Court that

Nolasco’s argument was not frivolous.

Plaintiff derides Nolasco’s argument because, as Plaintiff argues, the jury’s $9,430.52

was not the true judgment, and that the true judgment was entered by the court after adding

Plaintiff’s attorney fees in the amount of $444,915.49. (Docs. 504, 505.) This assertion is

flawed for two reasons. The docket entry, titled “JUDGMENT” by the court on February

5, 2013, entered just after the jury verdict, reflects that “judgment is entered in favor of

plaintiff, Suenos, LLC, and against defendant [Goldman] in the amount of $9,430.52.” (Doc.

422.) Thus, Nolasco’s “prevailing party” argument utilizing this “judgment” was not, as

characterized by Plaintiff, evidence of Nolasco “intentionally ignor[ing] and distort[ing] the

difference between the jury verdict and the final judgment to justify his violation of the

Settlement Conference Order.” (Doc. 520, at 4.) In addition, although judgment was later

entered by the Court against Goldman in a much larger amount, after the Court granted

Plaintiff’s motion for attorney fees, that “judgment” was not entered until long after Nolasco

advanced his legal argument discussed above. 

Nolasco argues in his Order to Show Cause brief that there are exceptions to the

general proscription, provided by law and Fed. R. Evid. 408, to the use of settlement

conference communications outside of the settlement conference, and cites cases he asserts

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support the notion that such communications may be relevant in attorney fee disputes. (Doc.

507, at 8-9.) Nolasco cites Ingram v. Oroudjian, for the proposition that the “Ninth Circuit

has joined a number of other circuit courts in holding that ‘settlement negotiations may be

considered by the district court as a factor in determining a fee award.’” 647 F.3d 925, 927

(9th Cir. 2011). This Court finds this irrelevant to the question presented here, as Nolasco did

not make this argument in his original pleadings, and acknowledged that in any event, he

should have sought permission from the Court before referencing the communications, or at

least should have filed the pleadings under seal given this Court’s settlement conference

order and the general rule against the use of settlement communications in litigation.

In addition, although Nolasco may have reasonably believed his reference to

settlement communications in his aforementioned pleadings was appropriate, he does not

explain why he attached Plaintiff’s entire Settlement Conference Memorandum, which was

unnecessary, when only a few lines in the multi-page document were relevant. Furthermore,

although Nolasco’s argument regarding the propriety of referring to settlement

communications in a post-trial fee dispute may not be frivolous, he ignores the fact that

attorney fees are often taken into account in settlement negotiations, and the $100,000.00

Goldman may have offered Plaintiff was significantly less what Plaintiff had incurred in legal

fees by the time the settlement conference was held, and that Plaintiff ultimately was

successful on its claim that Goldman had breached the contract.

This Court finds that Nolasco did not act in bad faith, but was careless and sloppy in

violating the terms of this Court’s settlement conference order, and in so doing, affected the

court’s efficient administration of justice. Settlement communications are, as a general rule,

sacrosanct. Without the protection provided these communications, the settlement process

would be chilled. See, In re Teligent, Inc., 640 F.3d 53, 57 (2nd Cir. 2011) (“Confidentiality

is an important feature of the mediation and other alternative dispute resolution processes.

Promising participants confidentiality in these proceedings promotes the free flow of

information that may result in the settlement of a dispute, and protects the integrity of the

process.”). For that reason, few exceptions exist to pierce the veil, and Nolasco’s lack of

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reflection in this respect sets a bad precedent. Although a finding of civil contempt is not

appropriate in this case, as the conduct at issue is not continuing, and the facts before this

Court do not establish criminal contempt beyond a reasonable doubt, Nolasco’s actions in

referencing settlement communications, and filing Plaintiff’s Settlement Conference

Memorandum, without seeking permission from the Court in advance, are worthy of

sanctions pursuant to Rule 16(f), Fed. R. Civ. P., and Local Rule 83(f) for his failure to

comply with the orders of the Court.

For all of the above reasons, this Court recommends that the Court impose the

following sanction: Nolasco shall pay a fine of $250.00, out of his own personal funds, by

delivering a check in that amount, payable to the U.S. Clerk of Court, District of Arizona,

on or before 10 days after the Court’s final order imposing the sanction. Although the Court

could impose significantly more punitive sanctions, it is fair to presume that this sanction will

be sufficient to render counsel more diligent in the future in his attention to court orders and

the federal rules.

IT IS THEREFORE RECOMMENDED that Thomas Nolasco pay a fine of

$250.00, out of his own personal funds, by delivering a check in that amount, payable to the

U.S. Clerk of Court, District of Arizona, on or before 10 days after the Court’s final order

imposing the sanction.

IT IS FURTHER RECOMMENDED that the Court order the Clerk of Court to

strike Exhibit B of Defendant Goldman’s Supplemental Motion for Attorney Fees. (Doc.

463.)

This recommendation is not an order that is immediately appealable to the Ninth

Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of

Appellate Procedure, should not be filed until entry of the district court’s judgment. The

parties shall have fourteen days from the date of service of a copy of this recommendation

within which to file specific written objections with the Court. See 28 U.S.C. § 636(b)(1);

Rules 72, 6(a), 6(b), Federal Rules of Civil Procedure. Thereafter, the parties have fourteen

days within which to file a response to the objections. Failure timely to file objections to the

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Magistrate Judge’s Report and Recommendation may result in the acceptance of the Report

and Recommendation by the district court without further review. See United States v.

Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003). 

DATED this 8th day of January, 2014.

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