Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-05235/USCOURTS-cand-3_07-cv-05235-1/pdf.json

Parties Involved:
CIPC Worldwide Holdings Corporation
Counter-claimant
NetSuite, Inc.
Counter-defendant

Document Text:

United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

NETSUITE, INC.,

Plaintiff,

 v.

CIPC WORLDWIDE HOLDINGS

CORPORATION, a corporation, and DOES 1-

10,

Defendants. /

No. C 07-5235 SI

ORDER GRANTING PLAINTIFF’S

MOTION FOR TERMINATING AND

MONETARY SANCTIONS

On July 18, 2008, the Court held a hearing on plaintiff’s motion for terminating and monetary

sanctions, or in the alternative for summary judgment. Nobody appeared on behalf of defendant. For

the reasons set forth below, the Court GRANTS the motion.

BACKGROUND

On August 29, 2007, plaintiff filed a complaint in state court against defendant CIPC Worldwide

Holdings Corporation alleging claims for breach of contract, breach of the implied covenant of good

faith and fair dealing, and for quantum meruit. Plaintiff served defendant with the summons and

complaint on September 12, 2007 through defendant’s registered agent, Business Filings Incorporated

(“BizFilings”), in Wilmington, Delaware. Kelly Decl. ¶ 3, Ex. B. On October 12, 2007, defendant

removed this case to this Court. At that time, defendant was represented by counsel. On October 17,

2007, defendant filed its answer to the complaint as well as a counterclaim. 

On October 17, 2007, defendant’s counsel moved to withdraw from this case. On January 18,

2008, the Court granted counsel’s motion to withdraw, effective February 29, 2008. The Court’s order

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directed defense counsel to inform defendant in writing of the following: (1) the Court has granted the

motion to withdraw effective February 29, 2008; (2) the necessity for defendant to secure new

representation, and the consequences of the failure to do so; and (3) the date of the next case

management conference, March 28, 2008 at 2:00 p.m. On January 18, 2008, defense counsel filed a

letter addressed to defendant which informed defendant of these matters in accordance with the Court’s

order. Defense counsel also filed a certificate of service of the letter. 

On February 20, 2008, plaintiff’s counsel wrote an attorney, Jerry Freedman, who had previously

represented defendant (not in this action) to inquire whether Mr. Freedman had taken over

representation of defendant. Id. ¶ 4, Ex. C. The letter stated, inter alia, that plaintiff would presume

Mr. Freedman was not representing defendant if Mr. Freedman did not contact plaintiff’s counsel on

or before February 29, 2008. Id. Mr. Freedman did not contact plaintiff’s counsel. Id. ¶ 5.

On March 3, 2008, after conducting Internet research to locate a possible counsel for defendant,

plaintiff’s counsel contacted Shafik Bhalloo of Kronfeld Mackoff Silber LLP in Vancouver, British

Columbia, because Mr. Bhalloo and his firm were mentioned in a news article about defendant. Id. ¶

6, Ex. D. Plaintiff’s counsel asked whether Mr. Bhalloo represented defendant and informed him that

there were procedural requirements, including a “meet and confer” between the parties, that needed to

be completed by March 21, 2008. Id. Mr. Bhalloo responded by facsimile on March 5, 2008, stating

that he did not represent defendant, but that he had forwarded plaintiff’s March 3, 2008 letter to

defendant and that he had asked defendant to contact plaintiff’s counsel directly. Id. ¶ 7, Ex. E.

Plaintiff’s counsel never received a response from anyone at CIPC. Id. ¶ 8. 

Also on March 3, 2008, plaintiff’s counsel sent a letter to Joshua Truesdale, defendant’s Chief

Technology Officer, via mail (at BizFiling’s address) and email (josh@cipccorp.com) informing him

of defendant’s need to secure new counsel and of the need for the parties to meet and confer prior to

March 21, 2008 in order to prepare for the March 28, 2008 case management conference. Id. ¶¶ 12-13,

Ex. E. Plaintiff’s counsel also asked Mr. Truesdale to inform him of defendant’s current counsel in this

case. Id. Plaintiff’s counsel did not receive an error message indicating that the email transmission to

Mr. Truesdale had failed. Id. ¶ 13. Plaintiff’s counsel never received a response from Mr. Truesdale

or anyone at CIPC. Id. ¶ 14. Sometime after March 3, 2008, plaintiff’s counsel received a notice from

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BizFilings that it had resigned with the State of Delaware as the registered agent for defendant effective

January 14, 2008. Id. ¶ 15, Ex. G. 

On March 20 and 21, 2008, plaintiff’s counsel filed plaintiff’s Certification of Interested Entities

and plaintiff’s separate case management conference statement with the Court, and served both

documents on Mr. Truesdale via email. Id. ¶¶ 18, 20. Plaintiff’s counsel did not receive any error

messages indicating that the email transmissions failed, and plaintiff never received a response from Mr.

Truesdale or anyone at CIPC. Id. ¶¶ 18-23. Defendant did not file a Certification of Interested Entities

or a case management conference statement. On March 28, 2008, the Court held a case management

conference. Plaintiff’s counsel appeared on behalf of plaintiff, but nobody appeared on behalf of

defendant.

On April 17, 2008, plaintiff’s counsel served a cover letter and Requests for Admission on

defendant at defendant’s last known physical address in Canada, and via email to Mr. Truesdale. Id.

¶ 25, Ex. H. Again, plaintiff’s counsel did not receive an error message indicating that the email

transmission failed. Id. ¶ 26. The materials sent to defendant’s last known physical address were

returned to plaintiff’s counsel stamped “Moved/Unknown.” Id. Ex. I. Defendant’s responses to the

RFAs were due on May 19, 2008. Defendant did not respond to the RFAs. 

On June 13, 2008, plaintiff filed a motion for terminating and monetary sanctions, or in the

alternative for summary judgment. Plaintiff served the motion on Mr. Truesdale via email; this time,

plaintiff’s counsel received an error message indicating that the transmission failed. Plaintiff also served

the motion on defendant at defendant’s last known address in Delaware. Defendant did not file an

opposition.

DISCUSSION

Plaintiff moves for terminating sanctions due to defendant’s failure to comply with Court orders

and failure to appear in this case since the withdrawal of defense counsel. Federal Rule of Civil

Procedure 16(f) states that a Court may order sanctions as provided in Rule 37(b)(2)(A)(ii)-(vii) if a

party or its attorney fails to appear at a scheduling conference or fails to obey a scheduling or other

pretrial order. Rule 37(b)(2)(A)(vi) provides for the sanction of rendering a default judgment against

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the disobedient party. The Court’s decision to impose the sanction of a default judgment pursuant to

Rule 37 is reviewed for an abuse of discretion. See Stars’ Desert Inn Hotel & Country Club Inc. v.

Hwang, 105 F.3d 521, 524 (9th Cir. 1997). 

Before the Court can enter a default judgment against a defendant for violating an order, the

Court must consider “(1) the public’s interest in expeditious resolution of litigation; (2) the court’s need

to manage its dockets; (3) the risk of prejudice to the party seeking sanctions; (4) the public policy

favoring disposition of cases on their merits; and (5) the availability of less drastic sanctions.” Hyde &

Drath v. Baker, 24 F.3d 1162, 1166 (9th Cir. 1994) (citing Wanderer v. Johnston, 910 F.2d 652, 656

(9th Cir. 1990)). “The first two of these factors favor the imposition of sanctions in most cases, while

the fourth cuts against a default or dismissal sanction. Thus the key factors are prejudice and

availability of lesser sanctions.” Wanderer, 910 F.2d at 656.

Here, these factors weigh in favor of entering a default judgment against defendant. Defendant

has been on notice since January 18, 2008 of the need to secure new counsel no later than February 29,

2008. Defendant has apparently not retained new counsel, and has made no appearance in this case

since its former counsel withdrew. Accordingly, defendant is both in violation of this Court’s January

18, 2008 order, as well as Civil Local Rule 3-9(b), which provides that a corporation may appear only

through a member of the bar of this Court. Defendant has failed to meet and confer with plaintiff to

prepare a joint case management conference statement, failed to appear at the initial case management

conference, failed to provide initial disclosures, failed to respond to plaintiff’s RFAs, and failed to

oppose the instant motion. Defendant’s failure to participate in this case has made it impossible for this

litigation to proceed. Defendant has been warned that if it failed to secure new counsel it would be

subject to the sanction of a default judgment. In light of defendant’s complete failure to appear or

participate in this case in any way since its former counsel withdrew, there are no lesser sanctions that

are available. 

CONCLUSION

Accordingly, the Court GRANTS plaintiff’s motion for terminating sanctions, STRIKES

defendant’s answer, DISMISSES without prejudice defendant’s counterclaim for failure to prosecute,

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and imposes monetary sanctions in the amount of $5,737.74 for fees and costs incurred by plaintiff in

filing the instant motion. (Docket No. 36). As discussed at the hearing, plaintiff shall file a motion for

default judgment with declarations supporting the amount of the proposed judgment, and the Court will

hold a hearing on the motion on August 29, 2008 at 9:00 a.m.

IT IS SO ORDERED.

Dated: July 21, 2008 

SUSAN ILLSTON

United States District Judge

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