Opinion ID: 2976899
Heading Depth: 3
Heading Rank: 2

Heading: Discovery Sanctions Used Against Metzger

Text: The discovery sanctions against Metzger present a closer call, as he was served with discovery requests, and ultimately defied a court order compelling discovery. Such recalcitrant conduct would undoubtedly support some form of discovery sanctions, but after analyzing the four factor test provided in Freeland, we conclude that the harsh sanctions granted by the district court, which effectively ended the case, constitute an abuse of discretion and cannot stand. With respect to this first factor, this court “has held that absent a clear record of delay or contumacious conduct, an abuse of discretion occurs if the district court dismisses an action with prejudice.” Freeland, 103 F.3d at 1277 (citing Carter v. City of Memphis, 636 F.2d 159, 161(6th Cir. 1980)). Moretti and companies, and Metzger, failed to respond to discovery requests. The order compelling discovery from Moretti and Metzger was granted August 25, 2006, by a marginal entry order following a status conference. The stated deadline for defendants to provide discovery was August 31, 2006. Given that the defendants did not attend the status conference, or make an appearance at the November 9, 2006 bench trial, one must conclude that the conduct of Moretti and Metzger regarding discovery was contumacious, albeit for a relatively short period of time. Turning to the second factor, prejudice to the adversary, id., Peltz’s own argument somewhat undercuts a finding of prejudice. Peltz earlier obtained summary judgment against -8- No. 07-3338 Peltz v. Moretti, et al. Moretti, which was not appealed. This judgment continues to provide him unfettered access to any assets fraudulently transferred between companies, assets he claims in his brief are “more that enough to pay the judgment” owed. Regarding the key information to be discovered, Peltz already had access to the list of Moretti’s assets, the amount of the loan against the underlying Moretti assets, and notice that the assets were encumbered (both actual notice from Moretti’s deposition and tax return, and constructive notice from the public-record UCC filing statement). It would not have been difficult to determine the market value of the listed assets and thus determine the extent of any equity. Even with respect to the civil conspiracy claim, the prejudice resulting from the delay in discovery was not severe. The cases that have found prejudice to the adversary often cite to many months of costly delays, whereas this delay was a matter of weeks. “[T]he third factor is whether the party was warned that failure to cooperate could lead to the sanction . . . .” Id. The district court in this case never explicitly warned the parties about the possibility and severity of sanctions. Moretti and Metzger were served with Peltz’s motion for sanctions on October 3, 2006, to which they objected on October 13, 2006. Of course they were on notice that such sanctions could be granted. Peltz filed an amended motion for sanctions after the bench trial, on November 17, 2006, to which defendants objected on November 28, 2006. Clear notice is required, and this court has previously held that “routine language in a standard order, warning counsel of possible dismissal as a sanction for failure to comply . . . is not necessarily sufficient prior notice to immediately warrant the extreme sanction of dismissal.” -9- No. 07-3338 Peltz v. Moretti, et al. Freeland, 103 F.3d at 1279 (citing Vinci v. Consol. Rail Corp., 927 F.2d 287, 288 (6th Cir. 1991)). This case is unusual in that the motions for discovery sanctions came only one month before, and more than one week after, the trial. The motions provided notice as to the facts Peltz sought to have the court deem true, but it does not seem that the motions for sanctions should constitute prior notice in this case, because by then the parties did not appear to have sufficient time to comply with discovery requests and prevent the grant of sanctions. If all the above factors make for a close call, the fourth factor is fatal. The fourth factor “is whether less drastic sanctions were first imposed or considered” before the harsh sanction of dismissal or default is imposed. Id. at 1277. This court has stated that “the sanction of dismissal is appropriate only if . . . no alternative sanction would protect the integrity of the pretrial process.” Mulbah v. Detroit Bd. of Educ., 261 F.3d 586, 594 (6th Cir. 2001) (quoting Carter, 636 F.2d at 161). There is nothing on the record to indicate that any lesser sanction, such as financial penalties, perhaps designed to compensate for plaintiff’s increased discovery costs, were considered or imposed. For these reasons, then, the sanctions against Metzger must be set aside.