* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not

be published and is not precedent except under the limited circumstances set forth in 5TH CIR.

R. 47.5.4.

REVISED FEBRUARY 7, 2008

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 07-50399

PLASTICSOURCE WORKERS COMMITTEE; IGNACIO PEREZ; BRENDA

ABURTO; BRENDA AGUILAR; MARY ALMONTE; et al.,

Plaintiffs-Appellees,

v.

DAVID G. COBURN, doing business as Plasticsource Inc.,

Defendant-Appellant.

Appeal from the United States District Court 

for the Western District of Texas

USDC No. 3:05-cv-00434-DB

Before GARZA, STEWART, and OWEN, Circuit Judges.

PER CURIAM:*

Plaintiffs-Appellees, 64 former Plasticsource, Inc. (“Plasticsource”)

employees, brought suit against David G. Coburn alleging that Coburn failed to

give employees any notice ofthe closure of the Plasticsource, Inc. factory and the

employees’ impending termination, in violation of the Worker Adjustment and

Retraining Notification Act (“WARN Act”), 29 U.S.C. § 2101, et seq. Plaintiffs

United States Court of Appeals

Fifth Circuit

F I L E D

February 1, 2008

Charles R. Fulbruge III

Clerk
No. 07-50399

2

sought to hold Coburn, Plasticsource, and International Manufacturing

Solutions Corp. (“IMS”) jointly and severally liable for statutory damages under

the WARN Act. Coburn moved for judgment on the pleadings under Federal

Rule of Civil Procedure 12(c), arguing that an individual may not be held liable

for WARN Act violations. The district court denied his motion. Subsequently,

after a dispute over Coburn’s deposition, the district court struck Coburn’s

answer and granted Plaintiffs a defaultjudgment against Coburn under Federal

Rule of Civil Procedure 37. Coburn appeals the denial of his motion for

judgment on the pleadings and the district court’s striking of his answer and

entry of a default judgment against him. We affirm.

I.

Plaintiffs are 64 individual factory workers who were employed by

Plasticsource atits El Paso, Texas plant. The workers earned an average hourly

wage of $8.97, manufacturing plastic parts for companies such as Eureka,

Electrolux, and Toro. On January 26, 2005, Plasticsource’s factory closed

without warning, and workers were terminated. IMS, another company

allegedly controlled by Coburn, attempted to remove Plasticsource’s valuable

plastic injection molding equipment, but this removal was stopped by an

emergency injunction preventing removal of the equipment until the workers

were paid their final paychecks.

On November 17, 2006, the Plasticsource Workers Committee, on behalf

of the 64 individual employees, filed suit against Coburn in his individual

capacity, Plasticsource, and IMS under the WARN Act. 

Coburn is a Canadian citizen, who, attimes, resides in Scottsdale, Arizona.

From the record, the nature of Coburn’s involvement in Plasticsource and IMS

is not exactly clear. Apparently, in 2002, Plasticsource filed for Chapter 11

bankruptcy and a reorganization plan was developed. Thereafter, Coburn was

hired by a creditors’ committee to evaluate whether Plasticsource could be made
No. 07-50399

3

solvent and return to profitability. Coburn alleges that after determining that

Plasticsource was viable, he became involved in the company, but only as an

investor. He denies ever having been an officer, employee or shareholder of

Plasticsource. Plaintiffs contest this assertion, and state that in 2003 Coburn

held a 75% controlling interestin Plasticsource,that he transferred this interest

to another one of his companies, and that Coburn served as Plasticsource’s sole

director from May 2003 through the January 2005 plant closing.

To clarify the extent of Coburn’s relationship with Plasticsource and IMS,

Plaintiffs sought discovery from Coburn. This discovery was especially relevant

to Plaintiffs’ claim that Coburn operated Plasticsource as his alter ego, and

therefore should be liable for Plasticsource’s WARN Act damages. However, it

appears that Coburn resisted discovery throughoutthe litigation. Plaintiffs also

sought documents and responses to interrogatories, but Coburn refused

production. Plaintiffs moved to compel production, and on September 1, 2006,

the district court filed an order compelling the document production and fining

Coburn $1,600.00. Plaintiffs also sought to depose Coburn, but Coburn’s

attorneys refused, stating that:“Unfortunately, due to immigration laws, David

Coburn cannot spend any more time in the USA this year. Please let me know

what you would like to do about his deposition.” Plaintiffs moved to compel

Coburn’s deposition, and on August 29, 2006, the district court granted this

motion. The district court gave Coburn three options for the deposition: (1)

appearing at the offices of Texas RioGrande Legal Aid in El Paso, Texas in

September 2006; (2) if Coburn could not appear in El Paso, filing a deposition

explaining why and then appearing at a deposition in Juarez, Mexico; or (3) if

Coburn could not appear in Juarez, filing an affidavit explaining why, appearing

at a deposition in Canada, and paying the travel expenses of Plaintiffs’ counsel.

This notice also states that:
No. 07-50399

1 Coburn asserted that because he is Canadian citizen who is not a “permanent

resident” of the United States, he is only allowed to spend 180 days in the United States. He

claimed that for 2006, he had already exhausted these 180 days.

4

If Defendant Coburn fails to appear for his deposition

under the terms of the preceding Part (A), Plaintiffs

may move for an order imposing the sanctions stated by

Rule 37 (A), (B), and (C). If the Court grants such a

motion, it MAY RESULT IN A FINAL JUDGMENT

AGAINST DAVID Coburn, RENDERING HIM

PERSONALLY LIABLE FOR ALL OF PLAINTIFFS’

CLAIMS IN THE ABOVE MATTER, CLAIMS WHICH

AMOUNT TO ROUGHLY $500,000.

Plaintiffs then attempted to schedule Coburn’s deposition, but Coburn

refused to appear on any date in September 2006. On September 29, 2006

Coburn filed an affidavit indicating that because of his immigration status, he

would not be permitted to enter the United States until 2007,1 and that he could

be deposed in either Juarez, Mexico or Canada in December 2006. Coburn also

indicated that his brother was terminally ill, and that he would prefer the

deposition be held off for a few months. On October 19, 2006, Plaintiffs sought

to amend the September 1, 2006 discovery order to permitthe taking of Coburn’s

deposition in Juarez on December 4 and 5, 2006. In that request, Plaintiffs

indicated that they would “seek[] the sanctions already described to him by the

Court if he fails to comply.” On October 26, 2006, the district court issued an

amended scheduling order, which ordered Coburn “to appear for his deposition

to be taken in Juarez, Mexico during the month of December, 2006.” The order

further stated that “[i]f Mr. Coburn fails to obey this second order directing his

deposition, sanctions permitted by Rule 37(b)(2)(A) will be imposed.”

Plaintiffs noticed Mr. Coburn that his deposition would take place in

Juarez, Mexico on December 4 and 5, 2006, beginning at 9:30 a.m. each day. On

December 1, 2006, the Friday prior to the scheduled deposition, Coburn’s

attorney notified Plaintiffs that delays prevented Coburn from attending the
No. 07-50399

5

deposition until 1:00 p.m. on December 4. Coburn appeared for the deposition

on December 4. During the deposition, Coburn indicated that he had spent the

previous night at his home in Scottsdale, Arizona, in apparent contravention of

his earlier statements to the Court that was not permitted in the United States.

After about two hours of questioning, and against the advice of his counsel,

Coburn decided to leave the deposition. On the record, Coburn’s counsel stated

that Plaintiffs had told Coburn during the break that they would continue the

deposition on December 5th only if it was taken in El Paso, rather than Juarez,

and that Coburn was unwilling to do this. Plaintiffs indicated to Coburn that

they would seek a default judgment against him, but Coburn responded that he

did not care. Coburn then left the deposition, and notified Plaintiffs that he

would not appear on December 5th in El Paso to continue the deposition.

Subsequently, Plaintiffs moved for a default judgement, under Rule 37,

against Coburn on the basis that his noncompliance with the discovery order

compelling his deposition was “deliberate” and “willful.” On February 8, 2007,

the district court granted this motion, striking Coburn’s answer and accepting

all Plaintiffs’ allegations as true against him. The Court imposed $196,708.60

in total WARN Act damages, as well as costs and attorney’s fees. Coburn

appealed.

II.

Coburn first argues thatthe district court abused its discretion in striking

his answer and entering a default judgment against him. We review the

imposition of Rule 37 sanctions for abuse of discretion. Smith v. Smith, 145 F.3d

335, 344 (5th Cir. 1998). Generally, in the context of Rule 37 sanctions, a district

court abuses its discretion when it makes a mistake of fact or law. Tollett v. City

of Kemah, 285 F.3d 357 (5th Cir. 2002) 

Rule 37(b)(2) authorizes the district court to strike pleadings or render a

default judgment against a party as a sanction for failure to comply with a
No. 07-50399

2

In relevant part, Rule 37 provides:

(b) Failure to Comply with a Court Order.

. . . 

(2) Sanctions in the District Where the Action Is Pending.

(A) For Not Obeying a Discovery Order. If a party or a party's

officer, director, or managing agent--or a witness designated

under Rule 30(b)(6) or 31(a)(4)--fails to obey an order to provide

or permit discovery, including an order under Rule 26(f), 35, or

37(a), the court where the action is pending may issue further

just orders. They may include the following:

(i) directing that the matters embraced in the order or other

designated facts be taken as established for purposes of the

action, as the prevailing party claims;

. . .

(iii) striking pleadings in whole or in part;

. . .

(vi) rendering a default judgment against the disobedient

party.

6

discovery order.2 FED. R. CIV. P. 37(b)(2)(iii), (vi). When a district court awards

default judgment as a discovery sanction, two criteria must be met. Smith, 145

F. 3d at 344. First, the penalized party’s discovery violation must be willful. Id.

Second, the drastic measure is only to be employed where a lesser sanction

would not substantially achieve the desired deterrent effect. Id. The reviewing

court may also consider whether the discovery violation prejudiced the opposing

party’s preparation for trial, and whether the client was blameless in the

violation. Batson v. Neal Spelce Assocs., 765 F.2d 511, 514 (5th Cir. 2002).

Coburn does not argue that a lesser sanction would have sufficed, rather

he argues that his failure to continue to attend the deposition was not willful or

in bad faith. First, he argues that he did attend the deposition in Juarez, Mexico

and gave over 64 pages of deposition testimony. Second, Coburn contends that

based on Plaintiffs’ questions during the deposition related to his presence in the

United States, as well asPlaintiffs’ insistence thatthe deposition continue in the

United States, he reasonably believed Plaintiffs might attempt to report his

immigration violations to the authorities and that his attendance at the

deposition in El Paso, Texas would result in criminal prosecution because of his
No. 07-50399

7

immigration status. Therefore, he says that he was unable to comply with the

district court’s order regarding the deposition. In reply, Plaintiffs argue that it

is not only Coburn’s failure to show up in El Paso on December 5, 2006 that is

it at issue, it is also his refusal to complete the first day of depositions in Juarez,

Mexico. In addition, Plaintiffs argue that if Coburn really had any fear of arrest,

he could have remained in Mexico to complete the deposition on December 4,

2006. Plaintiffs deny threatening to report Coburn to the immigration

authorities, and reject his fear of arrest as illusory, pointing to Coburn’s return

to the United States the evening of December 4, 2006. 

The record contradicts Coburn’s claims and indicates that Coburn willfully

violated the district court’s order by leaving the deposition in Juarez on

December 4 after only two hours of questioning in a deposition that was

scheduled to last 12 hours. The district court’s order required Coburn to “appear

for his deposition” and indicated that the deposition would “continue on these

dates until completed for twelve hours total.” Coburn’s refusal to continue the

deposition after two hours was violative of this order, especially given that

Plaintiffs’ counsel clearly indicated their intention to continue the deposition

“right here, right now.” This is true regardless of whether Coburn’s fears of

prosecution justified his non-attendance on December 5. Further, Coburn’s noncompliance was willful and knowing. Coburn had fair warning that his noncompliance with the deposition would resultin sanctions. The district court had

stated as much in its orders, and Plaintiffs’ counsel indicated its intention to

seek Rule 37 sanctions if Coburn left the deposition. Indeed, Coburn’s decision

to leave the deposition was even made against the advice of counsel. “In making

its ‘bad faith’ determination, the district court was entitled to rely on its

complete understanding of the parties’ motivations.” Smith, 145 F.3d at 344.

In this case, Coburn had previously refused to comply with both written

discovery demands and the district court’s orders regarding his deposition.
No. 07-50399

8

Coburn’s prior dilatory and obstructive conduct was well-documented and the

extreme sanction of defaultjudgment was warranted by his actions. The district

court did not abuse its discretion by striking his answer and entering a default

judgment against him. See id. (parties’ repeated refusal to appear for

depositions and comply with discovery justified dismissal); Bonaventure v.

Butler, 593 F.2d 625, 626 (5th Cir. 1979) (“Deliberate, repeated refusals to

comply with discovery orders have been held to justify the use of this ultimate

sanction.”). 

III.

Second, Coburn argues that, as a matter of law, he cannot be held liable

for WARN Act violations because the WARN Act is applicable only to corporate

entities, not individuals. Therefore, he contends, this Court should reverse the

default judgment entered against him. Whether a natural person may be liable

for statutory damages under the WARN Act is a question of statutory

interpretation that we review de novo. See Dial One of the Mid-South, Inc. v.

BellSouth Telecomms., Inc., 269 F.3d 523, 525 (5th Cir. 2001).

The WARN Act prohibits employers from ordering a “plant closing or mass

layoff until the end of a 60-day period after the employer serves written notice”

of the closing or layoff to its employees. 29 U.S.C. § 2102(a). An employer who

violates this notice provision is required to provide “back pay for each day of

violation.” 29 U.S.C. § 2104(a)(1). “In short, WARN imposes a statutory duty

on businesses to notify workers of impending large-scale job losses and allows

for limited damages ‘designed to penalize the wrongdoing employer, deter future

violations, and facilitate simplified damages proceedings.’” Staudt v. Glastron,

Inc., 92 F.3d 312, 314 (5th Cir. 1996). 

The WARN Act and Department of Labor regulations define an employer

as any business enterprise that employs 100 or more employees. 29 U.S.C. §

2101(a)(1); 20 C.F.R. § 639.3(a)(1). Coburn argues that the use of the term
No. 07-50399

3 Coburn also alleges that he cannot be held liable for the WARN Act violations because

Plasticsource’s shut down was an unforeseen business circumstance. See 29 U.S.C. § 2102

(B)(2)(A) (“An employer may order a plant closing or mass layoff before the conclusion of the

60-day period if the closing or mass layoff is caused by business circumstances that were not

reasonably foreseeable as of the time that notice would have been required.”); Halkias v. Gen’l

Dynamics Corp., 137 F.3d 333, 335 (5th Cir. 1998) (affirming summary judgment to defendant

corporation because plant’s closure was not reasonably foreseeable). However, under the

district court’s order, Coburn’s answer, including his affirmative defenses, was stricken, and

all allegations in Plaintiffs’ complaint were to be accepted as true against him. Therefore, we

cannot consider Coburn’s fact-based argument that Plasticsource’s shut down was an

unforeseen business circumstance. 

9

“business enterprise” indicates that the WARN Act is only applicable to

corporate entities, not individuals. However, this Court has previously found

that natural persons may be held indirectly liable for statutory WARN Act

damages under an alter-ego theory. See Hollowell v. Orleans Reg’l Hosp., 271

F.3d 379, 385 (affirming judgment imposing liability for WARN Act damages on

three natural persons because jury found that the individuals were the alter egos

of the employer under Louisiana law). Under certain circumstances, Texas

recognizes the theory of alter ego liability, permitting a court to hold an

individual liable for corporate obligations. See Castleberry v. Branscum, 721

S.W. 2d 270, 271 (Tex. 1986) (holding that although incorporation normally

protects shareholders, officers, and directors from liability for corporate

obligations, “when these individuals abuse the corporate privilege, courts will

disregard the corporate fiction and hold them individually liable.”). Therefore,

we must reject Coburn’s contention that, as a matter of law, an individual can

never be held liable for WARN Act violations.

Under the district court’s order, all claims against Coburn were accepted

as true, including the claim that he is personally liable for the WARN Act

violations because “he operated Plasticsource as his alter-ego, and

Plasticsource’s corporate veil should be pierced as to Defendant Coburn.”3

Because this Court permits individuals to be held liable for WARN Act violations
No. 07-50399

10

under an alter-ego theory of liability, the district court did not err in holding

Coburn personally liable for the WARN Act violations at issue in this case.

IV.

For the foregoing reasons, we affirm the district court’s entry of default

judgment against Coburn.