Opinion ID: 596121
Heading Depth: 2
Heading Rank: 2

Heading: Default as a Sanction

Text: 23 Defendants next argue that the district court improperly entered default judgment as a sanction in the circumstances of this case. We review that decision under an abuse of discretion standard. Comdyne I, Inc. v. Corbin, 908 F.2d 1142, 1148 (3d Cir.1990). As we explained in Comdyne I, we apply some or all of the six-part test enunciated in Poulis v. State Farm Fire and Casualty Co., 747 F.2d 863, 868 (3d Cir.1984), in reviewing sanction orders that deprive a party of the right to proceed with or defend against a claim. Comdyne I, 908 F.2d at 1148. 24 In deciding whether to impose a default, the district court must consider: 25 (1) the extent of the party's personal responsibility; (2) the prejudice to the adversary caused by the failure to meet scheduling orders and respond to discovery; (3) a history of dilatoriness; (4) whether the conduct of the party of the attorney was willful or in bad faith; (5) the effectiveness of sanctions other than dismissal, which entails an analysis of alternative sanctions; and (6) the meritoriousness of the claim or defense. 26 Poulis, 747 F.2d at 868 (emphasis omitted). 27 Defendants argue that the district court failed to make findings as to all of the Poulis factors. Although we have required district courts to make explicit factual findings concerning these factors, see, e.g., Emcasco Ins. Co. v. Sambrick, 834 F.2d 71, 74 (3d Cir.1987), we have also stated that it is not necessary that all of the factors point toward a default before that sanction will be upheld. See Mindek v. Rigatti, 964 F.2d 1369, 1373 (3d Cir.1992). 28 In this case, the district court made the following findings when it arrived in court on the scheduled trial date to find plaintiffs present but defendants unprepared to proceed: 29 Based upon the factors that have been outlined by the Third Circuit in [Poulis ], the Court finds that those factors have been met here, that the parties in this case have been personally responsible for the conduct of this litigation, that the plaintiffs have been prejudiced by the failure of the defendants in this case in many instances to meet the scheduling orders and respond to discovery, that there has been a history all throughout this case of delay on the part of the defendants, ... that I find that the conduct in this regard has been willful and in bad faith.... 30 .... 31 In my opinion, in view of the long history of this case, no other sanctions that I could enter would be effective. 32 From the offer that I have heard, the claim of the plaintiffs is a strong claim. I had the opportunity of hearing also evidence at the time of the request for the preliminary injunction. 33 Based upon all of that, the Court is granting the request that I direct the clerk to enter a default in this case.... 34 App. at 557-58. 35 Defendants argue that these findings are inadequate and unsupported by the record. Accordingly, we proceed with a factor by factor analysis.
36 This is not a situation where we must allocate responsibility between the parties and their counsel. Defendants had personal responsibility for the conduct of the litigation after their attorney withdrew on October 18, 1991. Each of the three defendants was aware of the court's orders and the need to comply with discovery and to file a timely pretrial memorandum. 37 Meyer Blinder was personally present at the October 28, 1991 deposition, as was house counsel for IEI, when IEI was required to designate a corporate witness pursuant to Rule 30(b)(6). Rather than select an informed witness, Blinder and/or Glovin designated an IEI director who had no knowledge of the relevant facts. Four days earlier, Meyer Blinder had fired the only other person who could have shed some light on the facts. 38 John Cox's role was not as active as Meyer Blinder's, but he also was aware of the discovery requirements as he personally filed responses to plaintiffs' requests for admissions. Nonetheless, he failed to appear at trial and at the damages hearing, and has never suggested he was unaware of his responsibilities. 39 Such behavior is analogous to that before us in Comdyne I, where we affirmed the district court's finding of defendants' personal responsibility because [d]espite their knowledge of the pending sanctions and discovery orders, the defendants nevertheless continued to remain intransigent in their defiance of these orders. 908 F.2d at 1149; see also Curtis T. Bedwell & Sons v. International Fidelity Ins. Co., 843 F.2d 683, 692 (3d Cir.1988) (plaintiff shared personal responsibility for discovery abuses when, after firing his counsel, he rescheduled depositions, failed to produce documents, and maintained a lax attitude about the discovery process in general).
40 We reach a similar result with respect to the prejudice to the plaintiffs. Although the district court's discussion of the prejudice factor is not extensive, its conclusion is amply supported by the record. Plaintiffs were required to expend significant time and costs in attempting to secure responses to their discovery requests, responses which were never adequately made. As a result, plaintiffs were forced to prepare their pretrial memorandum without the information about Blinder, Robinson's markup practices which was necessary to prove plaintiffs' case at trial. Finally, plaintiffs failed to receive the defendants' pretrial memorandum, further prejudicing their ability to prepare an effective trial strategy. 41 In Poulis, we found prejudice to the non-defaulting party where [t]he interrogatories were never answered nor were objections filed; defense counsel was obliged to file a motion to compel answers, and was obliged to file its pretrial statement without the opportunity to review plaintiffs' pretrial statement which was due to be filed first. 747 F.2d at 868; see also Bedwell, 843 F.2d at 694 (upholding district court's finding of prejudice where although the defendants vigorously pursued the available discovery methods to avoid being prejudiced, they were deprived of important information because plaintiff delayed compliance with discovery orders). The record in this case demonstrates similar prejudice. In addition, the prejudice flowing from failure to proceed with a scheduled trial after the case had been pending for more than three years is apparent.
42 Although we believe that the defendants' dilatory behavior after counsel withdrew on October 18, 1991 provides a sufficient history of dilatoriness, we note that long before these events, while defendants were still represented by counsel, they failed to respond voluntarily to any of the plaintiffs' early discovery requests. As a result, plaintiffs were obliged to file two separate motions to compel and two motions for sanctions. We can infer that the district court considered this conduct when it stated that there has been a history all throughout this case of delay on the part of the defendants. App. at 557. This is a sufficient factual basis to support the court's finding of dilatoriness. See Poulis, 747 F.2d at 865, 868 (dilatoriness existed where plaintiff twice refused to file pretrial statement and failed to answer interrogatories).
43 The district court believed that the defendants' conduct was intentional and not the result of excusable neglect. The court's finding on this point was particularly specific and detailed: 44 I harken back to the incident of the dismissal or the withdrawal of Mr. Crawford in particular where he was simply not paid and he had no choice but to ask to withdraw.... [This] was just a self-inflicted wound on the part of the client. They knew that that would be the result and never did I hear the client say that they couldn't afford to pay. I think ... that the client simply picked a fight with the lawyer in order to try to get new counsel into the case to necessitate a delay. App. at 557-58. 12 45 This is not a case in which defendants were unable to find counsel to represent them but one during which they manipulated the situation. The defendants' professed inability to find replacement counsel is belied by the fact that Meyer Blinder and IEI were represented by attorneys before the Colorado bankruptcy court. The district court even offered to have Kalmon Glovin, IEI's in-house counsel, admitted to the Eastern District of Pennsylvania to replace Schnader, Harrison, but defendants refused to appoint Glovin as their trial counsel, using him instead tactically to file certain motions while Blinder acted pro se on other occasions. Moreover, defendants' present counsel, Stephen J. Mathes, had previously represented them before Mr. Crawford was retained. See note 12 supra. Inasmuch as the trial date had been set months earlier, the district court was entitled to view with some cynicism the coincidence of Mathes's reappearance for defendants on that date, and then only wrapped in conditions. 46 Further evidence of bad faith can be found in the defendants' total failure to respond to plaintiffs' requests for documents. Although IEI asserted in its opposition to the Rule 37 motion for sanctions that its compliance was precluded by conflicting obligations to the SIPC trustee, it could have easily directed its Colorado attorney, who was reviewing the same documents pursuant to an order of the bankruptcy court, to make copies for the Hoxworth class's attorneys. Based on this extensive evidence of willful conduct, we cannot say that the district court's finding that defendants acted in bad faith was clearly erroneous. Accord Bedwell, 843 F.2d at 695 (affirming district court's finding of bad faith where plaintiff knew that its counsel willfully failed to comply with three court orders, and ... outstanding discovery requests, and failed to advance plausible reasons for the failures).
47 Without detailed discussion, the district court stated that in view of the long history of this case, no other sanctions that I could enter would be effective. App. at 557. As we have repeatedly stressed,  '[d]ismissal must be a sanction of last, not first, resort.'  Emcasco, 834 F.2d at 75 (quoting Carter v. Albert Einstein Med. Cent., 804 F.2d 805, 807 (3d Cir.1986)). It cannot be denied that the court could have imposed some lesser penalty than default on Blinder, Cox, and IEI, such as imposition of costs and attorneys fees incurred in the course of plaintiffs' numerous motions to compel discovery. See Poulis, 747 F.2d at 869. Alternatively, it might have granted a postponement but precluded the defendants from presenting testimony at trial on issues related to their abuse of the discovery process. See Bedwell, 843 F.2d at 695-96. It is evident, however, that in light of the history of the defendants' conduct culminating in what the district court may have viewed as the last straw of not appearing at the firm trial date, the district court's finding that no other sanction would be effective was not an abuse of its discretion. 48
49 The district court concluded that the plaintiffs' claims were meritorious. Its decision finds strong support in our earlier analysis in Hoxworth I. Defendants argue that before granting default as a sanction, the district court should have evaluated their denials and affirmative defenses. Nothing in our precedent requires the district court to evaluate defenses that do not bear directly on the meritoriousness of the underlying claim. 50 Nor have we ever required that the district court balance both parties' claims and defenses. On the contrary, as we pointed out in Bedwell, unless the pleading asserted a dispositive defense (or claim), the issue of meritoriousness would be neutral. 843 F.2d at 696. We decline to require the district court to have a mini-trial before it can impose a default.
51 Although Poulis and its progeny have emphasized that the sanction of default is disfavored, our cases have also held that the district court rather than the court of appeals is in the best position to evaluate whether a default is proper. See e.g., Mindek, 964 F.2d at 1373-74. Guided by the principles we articulated in Poulis, the district court here concluded that a default against Blinder, Cox, and IEI was appropriate. Based on our review of the record, we have concluded that there is adequate support for the findings that underlay the district court's action. As the Supreme Court stated in regard to sanctions under Rule 37, the most severe in the spectrum of sanctions provided by statute or rule must be available to the district court in appropriate cases, not merely to penalize those whose conduct may be deemed to warrant such a sanction, but to deter those who might be tempted to such conduct in the absence of such a deterrent. National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 643, 96 S.Ct. 2778, 2781, 49 L.Ed.2d 747 (1976). Accordingly, we find no abuse of discretion and affirm the entry of default and the default judgment.