Opinion ID: 626354
Heading Depth: 2
Heading Rank: 1

Heading: The Appeal by Kurtz and Reid

Text: This court reviews for abuse of discretion a district court's imposition of default as a sanction under Federal Rule of Civil Procedure 37. Crispin-Taveras v. Municipality of Carolina, 647 F.3d 1, 7 (1st Cir.2011) (citing Remexcel Managerial Consultants, Inc. v. Arlequín, 583 F.3d 45, 51 (1st Cir.2009)). We review the factual findings upon which the sanction is based for clear error. Koken v. Black & Veatch Constr., Inc., 426 F.3d 39, 53 (1st Cir. 2005). A court of appeals is not concerned with whether it would have itself imposed the particular sanction chosen by the district court, Nat'l Hockey League v. Metro. Hockey Club, Inc., 427 U.S. 639, 642, 96 S.Ct. 2778, 49 L.Ed.2d 747 (1976) (per curiam), and instead typically defers to the district court, as the trial judge . . . is usually the person most familiar with the circumstances of the case and is in the best position to evaluate the good faith and credibility of the parties . . ., Remexcel, 583 F.3d at 51 (citing KPS & Assocs., Inc. v. Designs by FMC, Inc., 318 F.3d 1, 13 (1st Cir.2003)). The party challenging the imposition of a default judgment bears a heavy burden of demonstrating that the trial judge was clearly not justified in entering an order of default under Rule 37. Id. (quotation marks and alterations omitted). But in evaluating the appropriateness of the sanction, we need not examine evidence in the record beyond that considered by the district court when it imposed the sanction. See Robson v. Hallenbeck, 81 F.3d 1, 3 (1st Cir.1996). Further, while we give deference to the district court, we will not rubber-stamp the imposition of a sanction. See Benitez-Garcia v. Gonzalez-Vega, 468 F.3d 1, 5 (1st Cir.2006) (quoting Tower Ventures, Inc. v. City of Westfield, 296 F.3d 43, 46 (1st Cir.2002)). Federal Rule of Civil Procedure 37(b) provides a veritable arsenal of sanctions in the context of discovery, Crispin-Taveras, 647 F.3d at 7 (internal quotation marks omitted), including the imposition of default judgment against [a] disobedient party for failure to obey a court order, Fed.R.Civ.P. 37(b)(2)(A)(vi). The district court can also apply this sanction where a party fails to provide answers to interrogatories or produce documents for inspection, or for failure of a party to attend its own deposition. See Fed.R.Civ.P. 37(d)(3). While default judgment is considered a drastic sanction, its entry provides a useful remedy when a litigant is confronted by an obstructionist adversary and plays a constructive role in maintaining the orderly and efficient administration of justice. Crispin-Taveras, 647 F.3d at 7 (quoting Remexcel, 583 F.3d at 51) (internal quotation marks omitted). As this remedy is contrary to the goals of resolving cases on the merits and avoiding harsh or unfair results, the district court, in its superior on-the-ground position, must balance these competing considerations before entering default. Remexcel, 583 F.3d at 51 (quoting KPS, 318 F.3d at 13) (internal quotation marks omitted). A district court need not consider or try lesser sanctions before imposing default, Diaz-Fonseca v. Puerto Rico, 451 F.3d 13, 25 (1st Cir.2006) (quoting Damiani v. R.I. Hosp., 704 F.2d 12, 15 (1st Cir.1983)), but a failure to do so can contribute to a finding that the district court abused its discretion, Benitez-Garcia, 468 F.3d at 6 (citing Crossman v. Raytheon Long Term Disability Plan, 316 F.3d 36, 39-40 (1st Cir. 2002)). As always, the goal of a sanction is both to penalize wrongful conduct and to deter future similar conduct by the particular party and others who might be tempted to such conduct in the absence of such a deterrent. Nat'l Hockey League, 427 U.S. at 643, 96 S.Ct. 2778. Here, the district court imposed the sanction of default as to the veil piercing count based on a combination of oral orders: first, when it granted the motion for sanctions, and second, when it denied in part the motion to lift the default. In both cases, the district judge restricted its analysis to Kurtz's and Reid's failure to respond to the December 11, 2009 production/response deadline, the only basis for Companion's motion for sanctions. That deadline had been set nine days earlier, during which time the individual defendants, here, the appellants, were unrepresented by counsel. However, the district judge found the failure to comply with the deadline to be willful, where at least Kurtz was aware of the jeopardy [of sanctions] and didn't do anything about it. Though there was perhaps enough litigation misconduct by Kurtz and Reid for a default sanction if the totality of their behavior during the entire history of the case had been considered, the district court based the sanction on a single instance, for which there were significant and legitimate mitigating excuses, and did not make sufficient factual findings to support its ultimate sanction. Under those circumstances, we decline to extend our precedent to find that the sanction of default on the veil piercing count was appropriate. This sanction apparently was based on a single instance of misconduct, although arguably a continuing one. Our precedent makes clear that a severe sanction, such as default or dismissal, is inappropriate in most cases when based on one incident. See Crossman, 316 F.3d at 39 (A single instance of prohibited conduct cannot be a basis for [a severe sanction] if the conduct was not particularly egregious or extreme.) (quoting Top Entm't, Inc. v. Ortega, 285 F.3d 115, 118 (1st Cir.2002)) (internal quotation marks omitted). The conduct here cannot qualify as particularly egregious, where the defendants were unrepresented and unaware of the deadline at the time it was set. And while we generally give a wide berth to the presider's judgment that, under all the circumstances, [a] proffered justification [for failure to comply with a court order] is insufficient, Tower Ventures, 296 F.3d at 47, this is a case where we must ask more of the district court before affirming the imposition of such a harsh sanction apparently based on such a thin slice of misconduct. This would be a different case if, after allowing Kurtz and Reid to respond to a much broader charge of misconduct, the district court had supportably found that they had themselves engaged in a deliberate pattern of stonewalling with the aim of frustrating effective discovery and the progress of the case. [22] For example, the court might have found that the four extensions to the scheduling order resulted from the defendants' misconduct; that the individual defendants had acted improperly in objecting to their depositions and those of others; or that they had withheld documents in bad faith. After giving Kurtz and Reid a specific opportunity to respond to and explain their conduct as to individual incidents, and distinguishing between their own actions and those of their lawyers not directed by Kurtz and Reid, the court might have been able to find them as individuals willfully responsible for a pattern of prolonged and vexatious obstruction of discovery with respect to highly relevant records. S. New Eng. Tel. Co. v. Global NAPs Inc. ( SNET ), 624 F.3d 123, 148 (2d Cir.2010) (internal quotation marks and alterations omitted) (citing this pattern of conduct as a basis for the imposition of default judgment on a veil piercing count as a sanction); see also Crispin-Taveras, 647 F.3d at 7 (stating that default judgment provides a useful remedy when a litigant is confronted by an obstructionist adversary and plays a constructive role in maintaining the orderly and efficient administration of justice). However, the district court did not mention any of the foregoing as part of the basis for the sanction, and therefore we do not consider them in our review. See Robson, 81 F.3d at 3 (declining to consider potential pattern of litigation misconduct where only one incident formed the basis for the district court's sanctions order). While the imposition of a default judgment on a veil piercing claim is not unheard of in this circuit, see Global NAPs, Inc. v. Verizon New Eng. Inc. ( Verizon ), 603 F.3d 71, 93-95 (1st Cir.2010), cert. denied, ___ U.S. ___, 131 S.Ct. 1044, 178 L.Ed.2d 864 (2011), in that case, the misconduct upon which the default sanction was based was significantly more extreme than missing a single production deadline. In Verizon, this court affirmed the imposition of default judgment on a veil-piercing claim, where the [district] court made a number of factual findings that [we]re well supported in the record showing that the counterclaim defendants had violated [the district court's] orders and committed willful discovery misconduct, including the destruction of evidence and lying to the court. Id. at 93-94. The Second Circuit later also affirmed the same sanction in a related case, basing its holding on the willfulness behind the violations and the fact that the conduct of the sanctioned parties was not isolated but rather formed a pattern of prolonged and vexatious obstruction of discovery with respect to highly relevant records pertaining to the veil piercing claim. SNET, 624 F.3d at 147-48 (internal quotation marks and alterations omitted). The Second Circuit also considered important the fact that the parties were unmistakably on notice of their discovery obligations at the time of the violations, given the clarity of the district court's orders and its previous warnings. Id. at 148. Though we by no means suggest that the defendants here were faultless, for they were not, the facts of this case suggest less egregious circumstances than those in Verizon and SNET. There was no destruction of evidence or explicit finding of false statements to the court. See SNET, 624 F.3d at 147-48; Verizon, 603 F.3d at 94. There were no clear warnings that sanctions were imminent. See SNET, 624 F.3d at 148 (basing affirmance of default sanction in part on district court's warning that default would be imposed); Remexcel, 583 F.3d at 52 (noting that repeated, stern warnings by the district court supported the appropriateness of default judgment). Kurtz and Reid were unrepresented by counsel from the time of the discovery deadline to the time the default was originally imposed and therefore were not unmistakably on notice of their discovery obligations at the time they initially violated the district court's December 2, 2009 order. See SNET, 624 F.3d at 148 (finding no abuse of discretion in imposition of default judgment where party was clearly on notice of discovery obligations). Though not in formal compliance with the local rules, Kurtz did attempt to leave a current address with the clerk when he called on January 5, 2010, but received only the single communication containing the docket sheet (in an envelope bearing a handwritten address) and thereafter, no further notifications as to the district court proceedings. Finally, the district court did not make factual findings that the defendants had engaged in a pattern of obstruction or stonewalling. See SNET, 624 F.3d at 147-48 (emphasizing importance of pattern of prolonged obstruction in the determination of default judgment as an appropriate sanction). While the imposition of default on a veil piercing count as a Rule 37 sanction could on some evidence be appropriate, here, the factors distinguishing this case from Verizon and SNET persuade us that, on the basis of the conduct considered by the district court and the factual findings it made, such a sanction was not warranted. Unlike the district court, we do not view such a sanction as an intermediate one. We therefore vacate the default and remand to the district court for further proceedings, after which the court may make additional findings with respect to the need for additional sanctions beyond the fee sanction already granted (and if so, the nature of the sanction that it deems appropriate).