Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_19-mc-80277/USCOURTS-cand-3_19-mc-80277-4/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: Civil Miscellaneous Case

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

HRC-HAINAN HOLDING COMPANY, 

LLC,

Applicants,

v.

YIHAN HU, et al.,

Respondents.

Case No. 19-mc-80277-TSH 

ORDER GRANTING MOTION FOR 

SANCTIONS; ORDER TO SHOW 

CAUSE RE: CONTEMPT OF COURT

Re: Dkt. No. 59

Before the Court is Applicants’ Motion for Sanctions for Violating the Court’s February 25 

Discovery Order (the “Sanctions Motion”), filed March 12, 2020. ECF No. 59. For the reasons 

set forth below, the Court GRANTS Applicants’ Motion. 

I. BACKGROUND

Applicants sought leave to serve subpoenas on Respondents under 28 U.S.C. § 1782 to 

obtain discovery for use in two proceedings in the People’s Republic of China. ECF No. 1. The 

Court granted Applicants’ ex parte application. ECF No. 5. Respondents then moved to quash the 

subpoenas, ECF No. 15, and Applicants moved to compel discovery, ECF No. 14. On February 

25, 2020, the Court granted in part Applicants’ motion to compel discovery and ordered 

Respondents to produce documents by March 6, 2020. ECF No. 47. 

Respondents filed an appeal with the Ninth Circuit Court of Appeals on February 28. ECF 

No. 49. Late in the day on March 5, on the eve of the production deadline, Respondents filed a 

motion for a stay pending appeal. ECF No. 53. The motion was largely recycled from a prior 

motion to stay in a previous appeal, see ECF No. 21, with a new page of argument about law of 

the case. March 6 came and went, and Respondents did not produce documents. On March 12, 

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before the Court had ruled on the motion to stay, Applicants filed their Sanctions Motion. ECF 

No. 59. The Court denied the request for a stay pending appeal on March 17, 2020. ECF No. 61. 

The following day Respondents filed an Emergency Motion for Reconsideration. ECF No. 64. 

The Court denied the motion the same day. ECF No. 65. On March 19, Respondents filed an 

emergency motion in the Court of Appeals under Circuit Rule 27-3 to stay this Court’s February 

25 Order. They filed an Opposition to Applicants’ Sanctions Motion on March 20, 2020. ECF 

No. 65. In that Opposition, they asserted that the CIETAC Tribunal had issued an order on March 

18 rejecting Applicants’ attempted submission of additional materials. On March 22 Respondents

filed a pleading entitled a “Supplemental Opposition” to Applicants’ Sanctions Motion, which 

really just amounted to an improper request that the Court suspend Respondents’ discovery 

obligations. ECF No. 66.1

On March 23, the Ninth Circuit issued a temporary administrative stay of the February 25 

order. ECF No. 67. On March 30, the Ninth Circuit denied Respondents’ emergency motion for a 

stay of this Court’s Order. ECF No. 70. 

II. APPLICANTS’ MOTION FOR SANCTIONS

A. Legal Standard

Applicants move for sanctions pursuant to Federal Rule of Civil Procedure 37(a)(5)(A) and 

37(b)(2)(A). Rule 37(a)(5)(A) directs that a court order attorney’s fees if a party moves to compel 

discovery and the motion is granted. However, under Rule 37(a)(5)(A), the court must not order 

payment of fees if (1) the movant filed the motion before attempting in good faith to obtain the 

disclosure or discovery without court action; (2) the opposing party’s nondisclosure, response, or 

objection was substantially justified; or (3) other circumstances make an award of expenses unjust. 

Fed. R. Civ. P. 37(a)(5)(A)(i)-(iii). 

If a party fails to obey an order to “provide or permit discovery, including an order under 

Rule 26(f), 35, or 37(a),” Rule 37(b)(2)(A) authorizes the court where the action is pending to 

1 Respondents’ appeal of the February 25 order is what made their motion improper, as the appeal 

divested this Court of jurisdiction to reconsider or vacate the February 25 order. The Court is not 

suggesting that it has any desire to vacate or reconsider the order; it is merely noting why 

Respondents’ motion was improper.

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“issue further just orders,” which may include “treating as contempt of court the failure to obey” 

the order. Fed. R. Civ. R. 37(b)(2)(A). Furthermore, “[i]nstead of or in addition to” those orders, 

“the court must order the disobedient party, the attorney advising that party, or both to pay the 

reasonable expenses, including attorney’s fees, caused by the failure, unless the failure was 

substantially justified or other circumstances make an award of expenses unjust.” Fed. R. Civ. P.

37(b)(2)(C); see also LegalForce RAPC Worldwide P.C. v. Demassa, 2019 WL 5395038, at *4 

(N.D. Cal. Oct. 22, 2019) (“Most remedies ‘for dilatory conduct during discovery proceedings’ are 

discretionary,’” but Rule 37(b)(2)(C) is not.) (quoting Bollow v. Federal Reserve Bank of San 

Francisco, 650 F.2d 1093, 1102 (9th Cir. 1981)). Since “Rule 37(b)(2) provides for the award of 

reasonable expenses and attorney’s fees ‘caused by the failure’ to obey a court order to provide or 

permit discovery,” the provision is distinguishable from Rule 37(a), “which provides for the award 

of expenses resulting from efforts to secure an order compelling discovery.” Liew v. Breen, 640 

F.2d 1046, 1051 (9th Cir. 1981). 

Lastly, section 1782 provides that “[t]o the extent that the order does not prescribe 

otherwise,” discovery shall be produced, “in accordance with the Federal Rules of Civil 

Procedure.” 28 U.S.C. § 1782. Thus, section 1782 authorizes a court to issue orders under Rule 

37. See In re Application of Chevron Corp., 709 F. Supp. 2d 283, 302 (S.D.N.Y. 2010) ([S]ection 

1782(a) . . . contemplates the issuance of a subpoena or an order to produce and then, in the event 

of noncompliance, an application for sanctions, which may include contempt.”). 

B. Analysis

There is no doubt that Respondents violated the February 25 order. It required them to 

produce documents by March 6, and they didn’t. At the time of the violation, there was no stay in 

place, either by this Court or by the Ninth Circuit, so they were legally obligated to produce the 

documents, and they just didn’t do so. They filed a motion to stay the February 25 order late on 

March 5, but the stay motion by itself didn’t do anything. A motion is just “[a] request for a court 

order,” Fed. R. Civ. Proc. 7(b)(1). “[T]he filing of a motion to stay discovery does not 

automatically relieve the movant from continuing to comply with its discovery obligations.” 

Wells Fargo Bank, N.A. v. Iny, 2014 WL 1796216, *3 (D. Nev. May 6, 2014) (citing Willemijn 

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Houdstermaatschaapij BV v. Apollo Computer, Inc., 707 F. Supp. 1429, 1441 (D. Del. 1989)

(“Defendant’s argument assumes that the moment it has filed a motion to stay discovery . . . it 

need no longer obey basic discovery rules. . . . Simple logic teaches that . . . unless and until it is 

granted a stay, defendant should be required to conduct discovery as if no motion had been filed at 

all.”)); Nat’l Corporate Tax Credit Funds III v. Potashnik, 2008 WL 11339608 at *1 (C.D. Cal. 

June 16, 2008) (“That defendants have sought a stay is insufficient to avoid their discovery 

obligations.”) (quoting Tinsley v. Kemp, 750 F. Supp. 1001, 1013 (W.D. Mo. 1990) (“[B]y 

refusing to comply with discovery merely because a motion to stay is pending, a party effectively 

is granting its own motion to stay — even before the court has ruled. Such a phenomenon would 

reduce a court’s orders to useless and senseless formalities.”); Hydramar, Inc. v. General 

Dynamics Corp., 115 F.R.D. 147, 153 (E.D. Pa. 1986) (the “mere filing of the motion to stay 

discovery was not sufficient to relieve it of its duty to produce”)). There was a temporary stay in 

place from March 23-30 by the Ninth Circuit, but that stay came 17 days after the violation began.

So, the Court must determine if this violation was substantially justified or whether other 

circumstances make an award of expenses unjust. It’s easy to imagine a situation in which 

violating a court order might be substantially justified, especially when you’re trying to appeal it. 

Suppose a court orders you to produce all your attorney-client privileged documents tomorrow. 

You immediately move for a stay while you frantically draft your mandamus petition. Briefing on 

the stay motion, and a decision by the court, are unlikely to be completed in a day, which means 

you are faced with either being in violation of the court order or facing significant prejudice to 

your client if you comply. You can change this hypothetical in a bunch of different ways to come 

up with other situations where violating a court order might be substantially justified. Suppose a 

court sets a production deadline in a section 1782 proceeding (like this one). You file a stay 

motion as soon as you reasonably can after the court issues the order, but the court sits on the 

motion for weeks. The common theme in situations where violating a court order could be 

substantially justified is that you tried your best to avoid the violation. 

However, it is also easy to come up with hypotheticals where the violation has no 

justification at all. Suppose you’re in a section 1782 proceeding and the court sets a production 

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deadline that’s 10-15 days out. You could easily write the stay motion and get it on file. It would 

take no more than a few hours. But you decide not to. No, instead of promptly seeking a stay, 

you wait. And wait. And wait. Then, the night before the production deadline, you file your stay 

motion. You could easily have filed it much sooner, you could have given the court time to 

consider and rule on it by the time of your production deadline, but you deliberately chose not to. 

You waited so long to move for a stay that you created the situation where the production deadline 

is tomorrow, and it’s not feasible to brief the stay motion and get a court ruling in time. In this 

situation, when the production deadline passes, there is no substantial justification for being in 

violation of the court’s order. It’s your fault. You didn’t do anything to promptly seek a stay. 

So, the substantial justification inquiry comes down to this: did the litigant make a diligent 

effort to avoid being in violation of the court order? 

Here, Respondents did not, and in fact the Court’s just-described “hypothetical” scenario 

of a violation with no justification at all is essentially what happened here. The Court granted 

Applicants’ motion to compel on February 25, 2020 and ordered Respondents to produce 

documents by March 6, 2020. Respondents didn’t file their motion to stay pending appeal until 

late in the day on March 5, even though the motion was largely recycled from a prior filing. There 

wasn’t any reason for Respondents to wait until the eve of the production deadline to file their 

motion to stay. In fact, they admit that. Respondents argue that “they have never pretended that 

they were unable to file the renewed motion to stay prior to March 5,” ECF No. 65 at 2, but that is 

precisely the problem. Respondents did not diligently move for a stay, but they should have. The 

timing of their stay motion unavoidably put them in violation of the February 25 order, and that 

could have been prevented by moving for a stay promptly. All of Respondents’ arguments boil 

down to the assertion that moving for a stay was good enough and that it doesn’t matter how 

dilatory they were in moving for one. They’re wrong.

Further, although a finding of bad faith isn’t necessary to award fees for a violation of a 

court order, the circumstances of this case strongly indicate that Respondents acted in bad faith. 

They waited until March 5 to move for a stay as part of their larger strategy of dragging things out 

as long as possible in the hope of running out the clock in the Chinese arbitration proceeding, so 

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that even if Applicants prevail in this 1782 proceeding, it will be too late to do them any good in 

one of the two foreign proceedings they want to use this evidence for. Respondents did not move 

quickly to file a stay motion because they didn’t want that issue addressed quickly. They were 

happy to be in violation of a court order as the stay litigation played out because it meant the clock 

was ticking, potentially prejudicing Applicants. The circumstances here suggest bad faith, which 

is the opposite of substantial justification.

The Court finds Respondents’ failure to comply with its order was not substantially 

justified, and thus an award of reasonable expenses, including attorney’s fees, is appropriate under 

Fed. R. Civ. P. 37(b)(2)(C). 

C. Attorneys’ Fees

Applicants’ Counsel, Grant L. Kim, avers that leading up to March 12, when Applicants 

filed their Sanctions Motion, Applicants incurred $11,110 in extra attorney’s fees as a result of 

Respondents’ noncompliance with the Court’s order. Decl. of Grant L. Kim in Supp. of 

Applicants’ Mot. for Sanctions (“Kim Decl.”) ¶ 24, ECF No. 59-1. He explains that the fees 

related to: (1) preparation of the Sanctions Motion as well as supporting declarations; (2) legal 

research relevant to that motion; (3) extensive communications with Respondents’ counsel and the 

Court about this matter, including communications with Respondents about their refusal to 

produce discovery; (4) legal research for Applicants’ Opposition to Respondents’ renewed motion 

to stay; and (5) preparation of that Opposition. Id. ¶ 25. According to Kim, he worked well over 

12 hours on those tasks, and a litigation associate in his Los Angeles office, Alex Su, worked at 

least 10 hours on the tasks. Id. ¶ 26. Kim claims an hour billing rate of $650 per hour, and a rate 

of $330 per hour for Su, for a total amount billed through March 12 of $11,110 (12 hrs at $650 + 

10 hrs at $330). Id. ¶ 27. 

However, not all of those fees are recoverable. The first three categories of tasks relate to 

the sanctions motion, as those fees would not have been incurred if Respondents had complied 

with the February 25 order. However, the last two categories are expenses incurred in opposing 

the stay motion. Those fees would have been incurred regardless. Respondents were entitled to 

move for a stay. The Court has faulted them for the dilatory timing of their stay motion, not for 

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filing one at all, which was their right. Since most of the pre-March 12 tasks for which Applicants 

seek fee recovery are appropriately compensable, but the last two categories are not, the Court will 

conservatively cut the fees as of March 12 in half to $5,055.

Kim avers that since March 12, Applicants have incurred around $16,000 in additional fees 

related to further briefing on the Sanctions Motion. Supp. Decl. of Grant L. Kim in Supp. Of 

Applicants’ Mot. For Sanctions (“Kim Supp. Decl.”) ¶ 5, ECF No. 72. In particular, he explains 

that he spent 19.4 hours preparing Applicants Reply in Support of Motion for Sanctions along 

with supporting declarations (ECF Nos. 69, 69-1, and 69-2). Id. Su spent 10.2 hours on legal 

research and in assisting Kim with drafting the Reply. Id. Thus, Applicants incurred $15,976 on 

those tasks (19.4 hrs at $650 + 10.2 hrs at $330).2 Additionally, Kim says that he spent six hours 

preparing his supplemental declaration in support of sanctions and the accompanying brief, 

amounting to $3,900 in fees. Id. ¶ 6. Thus, since March 12, Applicants incurred $19,876 in 

attorneys’ fees in connection with their Sanctions Motion. (Adding that to the allowed amount for 

pre-March 12 fees yields $24,931.)

Lastly, Applicants also ask for $21,850 in fees incurred in responding to Respondents’ 

emergency motion for a stay filed with the Ninth Circuit. However, fees that Applicants incurred 

in responding to Respondents’ motion for a stay before the Ninth Circuit were not related to 

Applications’ Sanctions Motion, and thus Rule 37(b)(2) does not provide for the awarding of those 

fees and they are denied. 

Turning to the rest of the fees, “billing rates should be established by reference to the fees 

that private attorneys of an ability and reputation comparable to that of prevailing counsel charge 

their paying clients for legal work of similar complexity.” Welch v. Metro. Life Ins. Co., 480 F.3d 

942, 946 (9th Cir. 2007) (citations omitted). “Affidavits of [a party’s] attorney and other attorneys 

regarding prevailing fees in the community, and rate determinations in other cases, particularly

those setting a rate for the plaintiffs’ attorney, are satisfactory evidence of the prevailing market 

rate.” United Steelworkers of Am. v. Phelps Dodge Corp., 896 F.2d 403, 407 (9th Cir. 1990) 

2 Kim arrived at an amount of $16,270, but his calculation of Su’s fees here was slightly off. 

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(citation omitted). Kim asserts in his Declaration that he believes his and Su’s hourly billing rates 

are reasonable considering their level of experience and prevailing market rates. Kim Decl. ¶ 28. 

Su has over five years of experience in commercial litigation experience, and Kim has over 30 

years of experience with commercial litigation and international arbitration, including 25 years at 

Morrison & Foerster where he held positions as litigation partner, associate, and of counsel. Id. ¶¶ 

28-29. Courts in this District have found hourly rates of $650 per hour to be reasonable for 

attorneys with similar experience. See, e.g., Echague v. Metro. Life Ins. Co., 69 F. Supp. 3d 990 

(N.D. Cal. 2014) (claimed hourly rate of $650 for ERISA plan beneficiary’s lead counsel was 

reasonable); Californians for Disability Rights v. California Dep't of Transp., 2010 WL 8746910, 

at *3 (N.D. Cal. Dec. 13, 2010) (awarding $570 and $650 an hour in civil rights case to attorneys 

with between ten and eighteen years of practice). Applicants’ claimed hourly rates are reasonable

considering Kim and Su’s experience and prevailing rates in this District. Additionally, the Court 

finds Applicants’ fee request reasonable in terms of hours expended. See, e.g., Davis v. Elec. Arts 

Inc., 2018 WL 1609289, at *7 (N.D. Cal. Apr. 3, 2018) (finding nearly $20,000 billed for work on 

discovery sanctions motion to be reasonable and awarding a total of $25,000 in addition to 

evidentiary sanctions); Cuviello v. Feld Entm’t Inc., 2015 WL 877688, at *4 (N.D. Cal. Feb. 27, 

2015) (awarding $11,275 for work on discovery sanctions motion).

Accordingly, the Court GRANTS Applicants’ request for attorneys’ fees for work related 

to the Sanctions Motion. Respondents shall pay attorneys’ fees to Applicants in the amount of 

$24,931.

D. Additional Sanctions

Lastly, the Court must consider whether additional measures are justified here. “The 

necessity justification for the contempt authority is at its pinnacle, of course, where contumacious 

conduct threatens a court’s immediate ability to conduct its proceedings, such as where a witness 

refuses to testify, or a party disrupts the court.” Int’l Union v. Bagwell, 512 U.S. 821, 832 (1994). 

“Contempts such as failure to comply with document discovery, for example . . . touch upon the 

core justification for the contempt power.” Id. at 833; see also Richmark Corp. v. Timber Falling 

Consultants, 959 F.2d 1468, 1480 (9th Cir. 1992) (“Where the purpose of a civil contempt 

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sanction is to coerce good faith efforts to comply with a discovery request, contempt is proper.”) 

(citation omitted). Respondents have for nearly a month now failed to comply with the Court’s 

discovery order. The Court ORDERS Respondents to SHOW CAUSE why they should not be 

held in contempt of court and, in addition, sanctioned $2,000 per day until they comply with the 

February 25 order. Their response is due by April 7, and Applicants may reply by April 10. 

IT IS SO ORDERED.

Dated: April 2, 2020

THOMAS S. HIXSON

United States Magistrate Judge

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