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Parties Involved:
Federal Deposit Insurance Corporation
Appellee
Richard Harmes Rossmiller
Appellant

Document Text:

FIL ... 4 .J 

Unitro State& Court of Appeals 

UNITED STATES COURT OF APPEALS 'l.,enth Circuit 

FOR THE TENTH CIRCUIT APR 21 1993 

ROBERT L. HOECKER 

In re: RICHARD HARMES ROSSMILLER, 

Debtor, 

RESOLUTION TRUST CORPORATION, as 

Receiver for Hill Financial Savings 

Association; FEDERAL DEPOSIT INSURANCE 

CORPORATION, as Receiver for Buena 

Vista Bank & Trust; FEDERAL DEPOSIT 

INSURANCE CORPORATION, in its corporate 

capacity, 

Plaintiffs-Appellees, 

v . 

RICHARD HARMES ROSSMILLER, 

Defendant-Appellant. 

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Clerk . 

) No. 92-1192 

) (D . C. No. 91-K-1211) 

) (D . Colo.) 

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ORDER AND JUDGMENT* 

Before McKAY, Chief Judge, HOLLOWAY, and BARRET!', Circuit Judges. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P. 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3 . 

Appellate Case: 92-1192 Document: 010110212819 Date Filed: 04/21/1993 Page: 1 
34 (a ) ; 10th Cir. R. 34.1.9. 

submitted without oral argument. 

The case is therefore ordered 

Defendant Richard H. Rossmiller appeals from the judgment of 

the district court affirming the bankruptcy court's entry of 

default judgment against him for his failure to comply with that 

court's discovery orders. We exercise jurisdiction under 

28 U.S.C. § 158 (d ) and affirm. 

The procedural history of this case is adequately set out in 

the district court's Memorandum Decision on Appeal . We review the 

bankruptcy court's entry of default judgment for abuse of 

discretion under the totality of the circumstances. M.E.N. Co. v. 

Control Fluidics, Inc., 834 F.2d 869, 872 (10th Cir. 1987) . 

Mr. Rossmiller makes the same arguments on appeal to this 

court as before the district court. We have considered his 

arguments and have reviewed the record carefully. We affirm the 

order of the district court affirming the bankruptcy court's entry 

of default judgment for substantially the same reasons set forth 

in the district court's well-written and thorough Memorandum 

Decision On Appeal, entered May 28, 1992, a copy of which is 

attached hereto. 

The judgment o f the United States District Court f or the 

District of Colorado is AFFIRMED. 

Entered f o r the Court 

James E. Barrett 

Senior Circuit Judge 

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Appellate Case: 92-1192 Document: 010110212819 Date Filed: 04/21/1993 Page: 2 
IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLORADO 

CASE NO. 91-K-1211 

Bankruptcy No. 89-B-13973 - C 

Adversary No. 90 D 391 

In re: RICHARD HARMES ROSSMILLER, 

Debtor. 

RESOLUTION TRUST CORPORATION, 

as Receiver for Hill Financial 

savings Association and FEDERAL 

DEPOSIT INSURANCE CORPORATION, 

as Receiver for Buena Vista Bank 

& Trust, 

Plaintiffs-Appellees, 

vs. 

RICHARD HARMES ROSSMILLER, 

Defendant-Appellant. 

FILED 

UNrrED ~ATESDISTIICTc:otJR' 

OENVeR. COl.OltADO 

MAY 2 8 ,992 

JAMES R. MANSPEAKER 

QED 

MEMORANDUM DECISION ON APPEAL 

KANE, J. 

This case is before the court on Richard Rossmiller's 

("debtor") appeal from an order of the bankruptcy court entering a 

default judgment against the debtor as a sanction for his failure 

to comply with the court's discovery orders. The debtor asserts 

that the bankruptcy court abused its dis cretion in entering the 

default order and in refusing to reconsider the default order in 

the face of certain alleged governmental misconduct. I review the 

bankruptcy court's decision only to determine whether it abused its 

discretion. Perceiving no abuse of discretion, I affirm the entry 

of default. 

Appellate Case: 92-1192 Document: 010110212819 Date Filed: 04/21/1993 Page: 3 
I 

r 

I. Facts and Procedural History 

On October 13, 1989 , the debtor filed a petition under chapter 

7 of the bankruptcy code. He sought to discharge debts of 

approximately 25 million dollars. On May 14, 1990, the Resolution 

Trust Company ( "RTC") and the Federal Deposit Insurance Corporation 

("FDIC") (collectively "receivers") filed a complaint to determine 

dischargeability of debt. The complaint was lengthy and factually 

complicated. It alleged thirteen claims for relief under 11 u.s.c. 

§ 727(a)(2)(A), § 727(a)(3), § 727(a)(4)(A), § 727(a)(4)(D), § 

727(a)(5), and 11 u.s.c. § 523(a)(2)(B). The debtor filed an 

appropriate answer on July 18, 1990. 

were Skeen & Pearlman, P.C. 

His attorneys at the time 

On September 20, 1990, the receivers served written 

interrogatories and requests for production of documents on the 

debtor. Before filing their adversary complaint, the receivers had 

received approximately four boxes of documents from the debtor 

directly, had conducted a three day deposition of respondent, 

sought and received numerous documents under rule 2003, and 

received from the debtor numerous signed waivers and releases 

directed to the platoon of lawyers and accountants who had 

previously assisted the debtor in his corporate and personal 

dealings. The receivers' discovery requests sought identification 

of certain personal and corporate bank accounts, information 

concerning the alleged fraudulent transfers to certain family 

trusts, and information concerning the formal corporate identities 

through which the debtor had operated before filing his petition in 

bankruptcy. 

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Appellate Case: 92-1192 Document: 010110212819 Date Filed: 04/21/1993 Page: 4 
The debtor sought and receiv ed extensions of time within which 

to respond to the receivers' discovery request until December 7, 

1990. By that date, new counsel, J. Scott Detamore, Esq., had 

substituted for- Skeen and Pearlman, P.C. on behalf of the debtor. 

The debtor sought substitution of counsel because he thought that 

his former attorneys would be necessary witnesses in the adversary 

proceeding. On December 7, 1990, the debtor filed a motion for 

protective order, seeking to avoid any response to the 

interrogatories and requests for production. Germane to this 

appeal, the debtor claimed that many of the documents the receivers 

sought were no longer in his possession and control. Before he 

moved to California in 1989, the debtor arranged to store 

commercially approximately 600 boxes of corporate and personal 

records at Security Archives of Denver ("the archives"). Because 

the debtor was in California and because he could not afford the 

retrieval fees for the boxes, he claimed he could not produce all 

the documents the receivers sought nor give complete, thorough and 

unqualified answers to written or oral interrogatories. 

On December 17, 1990, the debtor made some partial responses 

to some of the receivers 1 discovery requests. After the receivers 

moved to compel responses, the bankruptcy court held a hearing on 

January 15, 1991. After extensive argument, the bankruptcy court 

determined that the debtor's answers were incomplete and evasive. 

It overruled the bulk of the debtor's objections to the receivers' 

discovery requests. It went through each of the discovery requests 

in detail and entered specific orders as to each request for 

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Appellate Case: 92-1192 Document: 010110212819 Date Filed: 04/21/1993 Page: 5 
production and each interrogatory. The court specifically 

determined that the debtor had the obligation to determine whether 

and where certain responsive documents could be located. He 

ordered the debtor either to identify the specific box at the 

archives in which the relevant documents could be located or to 

state that no responsive documents existed. The bankruptcy court 

ordered the debtor to respond by February 14, 1991. He did not. 

The receivers then filed for default judgment on March 28, 1991, 

claiming that · such a sanction was appropriate in light of the 

debtor's pattern of behavior with respect to interrogatories and 

requests for production of documents. 

on March 29, 1991, the debtor's counsel, J. Scott Detamore, 

Esq., moved to withdraw. On April 17, 1991, the bankruptcy court 

granted the request to withdraw, but only after resolution of the 

pending motion for default. On April 15 and 24, 1991, the debtor 

submitted additional responses to the receivers' discovery 

requests. On May 20, 1991, the bankruptcy court heard argument on 

the motion for default. The debtor's counsel advised the court 

that the debtor had "done all that he could do." 

THE COURT: How much longer should I give you? 

MR. DETAMORE: --at this point, the answer that Mr. 

Rossmiller would give is he's done all he can do. 

THE COURT: Well, that's fine. If that's his answer, 

then he's going to be defaulted. 

MR. DETAMORE: That is his answer, Your Honor. 

THE COURT: All right. 

MR. DETAMORE: He tells me that he's given everything 

that he has or has access to, and anything else that he 

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Appellate Case: 92-1192 Document: 010110212819 Date Filed: 04/21/1993 Page: 6 
hasn't given would be in those boxes. 

The bankruptcy court again found that the debtor had not answered 

fully , completely and satisfactorily. It observed that the debtor 

had 

chosen to use this Bankruptcy Court for his own purposes. 

He then moves to California and pleads an inability to 

respond to discovery. 

The Court believes that that is nonsense . There is no 

evidence to support his inability to come back here to 

assist in obtaining the information. He has not made a 

good faith effort to answer the discovery •••• 

[T]he court is satisfied that Mr. Rossmiller has engaged 

in bad faith in failing to obey the Court's order of 

January 15. The Court also notes that the -- that Mr. · Rossmiller filed his voluntary . petition under Chapter 7 

on October 13, 1989 . There were many inaccuracies and 

omissions in his schedules, and that the plaintiffs have 

attempted to piece in since the schedules were filed and 

since the Section 341 meeting ••• was held, and at every 

turn, Mr. Rossmiller has obstructed their attempt to 

obtain information to which they are clearly entitled. 

III, Record on Appeal at 27-28. The court then denied discharge 

under§ 727 and entered judgment under§ 523 of the code in an 

aggregate principal amount of $26,397,858.84 p l us interest. 

The debtor moved for reconsideration on June 10, 1991. The 

debtor, through his original lawyers, Skeen & Pearlman, P.C., 

asserted that he had never authorized Mr. Detamore "to tell the 

court that he would not or could not comply with the discovery 

requests and Court order. " He claimed that he had always planned 

and intended to comply fully with the discovery requests and that 

any failure to do so was Mr. Detamore•s responsibility. He 

intimated that Mr. Detamore had been less than prepared and zealous 

at the May 20, 1991 hearing because he had not been paid and had 

be~n allowed to withdraw upon completion of the hearing on the 

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Appellate Case: 92-1192 Document: 010110212819 Date Filed: 04/21/1993 Page: 7 
motion for default . The debtor also sought an additional sixty 

days within which to answer the discovery requests. 

Thereafter, on June 18, 1991, the - debtor filed a motion to 

require plaintiffs to turn over documents, for sanctions and 

renewed his motion for a protective order. In it, the debtor 

alleged that the receivers had misled the bankruptcy court 

throughout their attempts to compel discovery. In particular, the 

debtor claimed he learned on June 14, 1991 that in August, 1990 the 

archives had destroyed many of the documents previously stored and 

that the receivers had actual knowledge of the archives' intent to 

destroy the documents and took no action to prevent their 

destruction. He also claimed that the FDIC and the FBI had 

removed, respectively, 16 and 196 boxes of records from the 

archives when destruction was threatened. Finally, debtor claimed 

that the receivers had been dishonest in their presentations to the 

court at the hearings in January and May, 1991 by their failure to 

disclose that the very documents they sought were either under 

their own control, in the hands of the F.B. I., or already destroyed 

by the archives. 

The bankruptcy court heard argument on the motion for 

reconsideration on July 1, 1991. It heard an offer of proof from 

the debtor to the effect that the debtor had never authorized Mr. 

Detamore to refuse to produce the discovery requested. It also 

heard an offer of proof with respect to the removal and destruction 

of the documents formerly located at the archives. The court 

rejected the debtor's claim that Mr. Detamore waa not authorized to 

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speak for him. The court also concluded that the debtor had not 

established its burden of showing a manifest error of law or fact 

and thus refused to overturn the default judgment. 

followed. 

II. Discussion 

This appeal 

Federal R.Civ.P. 37(b) (2) (C) and 37(d) permit a court to enter a 

default judgment against a party who fails to obey an order to 

provide discovery or who fails to respond to interrogatories or 

requests for production. I review the imposition of sanctions for 

abuse of discretion under the totality of the . , circumstances. 

M.E.N. Co. v. Control Fluidics. Inc., 834 F.2d 869, 872 (10th Cir. 

1987). A default judgment is a harsh sanction that will be imposed 

only when the failure to comply with discovery demands is the 

result of "'wilfulness, bad faith, or (some] fault of petitioner' 

rather than inability to comply." .Ig.Cguoting Societe 

Internationale Pour Participations Industrielles Et commerciales. 

S.A. v. Rogers. 357 U.S. 197, 212 (1958)). A "wilful failure" is 

an intentional failure rather than involuntary noncompliance. 834 

F.2d at 872-73. "If the fault lies with the attorneys, that is 

where the impact of sanction should be lodged." Mulvaney v. 

Rivain Flying serv,. Inc. (In re Baker), 744 F.2d 1438, 1442 (10th 

cir.1984) (en bane), cert. denied, 471 u.s. 1014 (1985). However, 

a client is bound by his lawyer's representation "when the lawyer 

1I am also mindful that a party's failure to produce 

information to which it has access may justify a finding that the 

information would be contrary to the recalcitrant party's position. 

Mammouth Oil Co. v. United States, 275 U.S. 13, 51, 48 S.ct. 1, 72 

L.Ed. 137 (1927) . 

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(or the client) makes a tactical decision and h is no ncompliance 

with the court's directive is not a product of inadvertence. 11 

Smith, 834 F.2d at 171. A court must determine whether a course 

of conduct results 

deliberate strategy. 

from mere inattention by counsel or is a 

In making findings on the issue of fault, a 

court should consider the factors set forth in Ocelot Oil Corp. v. 

Sparrow Industries, 847 F.2d 1458, 1465 (10th Cir. 1988). Those 

factors include (1) the degree of actual prejudice to other party; 

(2) the amount of interference with the judicial process; and (3) 

the culpability of the litigant. Finally, the cases teach that a 

court should not enter a default judgment without first considering 

if lesser sanctions would be effectiv~. In re Rains, 946 F.2d 731, 

733 (10th Cir. 1991); Ocelot, 847 F.2d at 1465. 

A. Sanctions for Discovery Abuse 

The debtor argues that the bankruptcy court failed to make 

sufficient findings concerning wilfulness, failed to distinguish 

between his lawyer' s culpability and his own, and failed to 

consider whether lesser sanctions would have been effective. I 

disagree. The record is replete with evidence of the debtor's bad 

faith. The debtor originally received the discovery requests in 

September, 1990. He sought extensions to respond until December, 

then filed for a protective order on the grounds that he had 

essentially provided the material sought by dint of his voluntary 

surrender of documents, his deposition, and by waiving any 

professional privileges with respect to his former lawyers and 

accountants. After an extensive question by question review of the 

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interrogatories and requests for production, the bankrup tcy court 

ordered the debtor to answer the discovery requests within thirty 

days. He specifically ordered the debtor to provide the documents 

under the custody and control of the archives. 

Again, the debtor did not. Instead, he again tried to argue 

that the discovery requests were overbroad, unduly burdensome, and 

impossible to fulfill since many of the documents were located in 

the archives. The debtor even filed an affidavit to that effect in 

opposition to the motion for default judgment. In point of fact, 

the debtor never produced the ante-nuptial agreement the receivers 

requested, never produced expense reports for the year before 

bankruptcy, and never provided certain insurance policies the 

receivers sought. Furthermore, his other answers were both 

unbelievable and disingenuous. He claimed to be unaware of sJlY 

documents that would reflect his compensation and interest in six 

business entities he owned and operated in the year before 

bankruptcy. He initially failed to identify in his schedules any 

business or personal bank account information. In his answers he 

identified some thirteen accounts, but again fai led to provide the 

account number for the personal account listed. He left out 

critical detail about the transfer of automobiles to his wife. He 

provided less than full disclosure about certain tap fees which had 

been held in trust for him. He repeatedly referred the receivers 

to the archives, even in the face of the bankruptcy court's 

specific order to the contrary. I need not go on . There was ample 

evidence to support the bankruptcy court's conclusion that the 

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debtor had wilfully refused to comply with its orders. His conduct 

is a study in arrogance. 

I also find that the court properly distinguished between 

attorney and client in imposing sanctions. First, the court 

specifically rejected, as incredible, the debtor's offer of proof 

that Mr. Detamore was not authorized to speak for the debtor as he 

did during the May hearing. In this regard, the court expressed 

its willingness to hear and consider testimony from Mr. Detamore to 

the effect that he made unauthorized statements on his client's 

behalf. The debtor chose never to produce Mr. Detamore for such 

testimony. Second, the court specifica~ly noted in the May 20 

hearing that the debtor "had not made a good faith effort to answer 

the discovery, and that I am not suggesting that you [the lawyer) 

are in any way responsible. " Further, the court specifically 

referred to both the Supreme Court's decision in National Hockey 

League v. Metropolitan Hockey corp •• Inc., 427 u.s. 639 (1976), and 

to this circuit's decision in Bud Brooks Trucking v. Bill Hodges 

Trucking, 909 F.2d 1437 (10th Cir. 1990). While the court used 

some ambiguous language in apportioning relative responsibility, 

it is clear to me that he distinguished between lawyer and client, 

and properly held the debtor, not the debtor's lawyer, responsible 

for the course and plan of the discovery abuse. 

In the context of this case, there was no reason to make 

extensive findings about the effectiveness of sanctions other than 

di~missal. The debtor's counsel's colloquy with the court on May 

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I 

t 

20, 1991 convinces me that the debtor had no intention of complying 

with the court's orders, even if given additional time within which 

to respond. It was not until default entered that the debtor, 

himself, even bothered to make an appearance in the bankruptcy 

court. Under such circumstances, no specific findings are 

essential. 

B. Reconsideration 

Under Fed . R. Civ. P. 59, a trial court may reconsider a 

judgment previously entered upon a showing that a manifest error of 

law or fact caused the entry of the earlier judgment. I review the· 

bankruptcy court's decision on the abuse of discretion standard. 

The debtor argues that he could not have complied with the 

bankruptcy court's order of January, 15, 1991, because the archives 

had destroyed all remaining documents as early as August, 1990. He 

also claims that the receivers were dishonest in their arguments to 

the court in January because they did not disclose that they knew 

the documents had been destroyed or removed from the archives by 

the F. D. I • C. and the F . B. I. The debtor thus argues that-the 

default judgment should be reversed because the bankruptcy court 

premised it on a faulty assumption of fact, namely that the records 

necessary for the debtor to answer the discovery requests were in 

the archives in Denver. The receivers acknowledged that they were 

aware that some of the documents had been removed from the archives 

but affirmatively stated that they believed, at the time of the 

January 15, 1991 argument that the bulk of the documents were still 

at the archives. The bankruptcy court found the debtor's argument 

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unpersuasive as do I. 

The bankruptcy court ruled that the debtor had an obligation 

both to produce the documents requested and to answer the 

interrogatories asked. The bankruptcy court did not rule 

conditionally. It did not rule that the debtor should produce the 

documents and answer the interrogatories only if the documents were 

in the archives. The debtor's obligation after the January 15, 

1991 ruling was to make a good faith effort to answer the 

interrogatories and produce the requested documents. The debtor 

made desultory efforts at best. The bankruptcy court imposed 

sanctions to punish this debtor and to prevent similar discovery 

abuse from happening in any other case . The bankruptcy court did 

not abuse its discretion. 

The judgment of the bankruptcy court is affirmed. 

DATED at Denver, Colorado this 28th day of May, 1992. 

OGE 

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