Court Opinion

ID: 8210002
Source: CourtListenerOpinion
Date Created: 2022-09-28 19:00:54.202208+00
Date Added: 2024-06-11T16:41:46.786452
License: Public Domain

USCA11 Case: 21-11985     Date Filed: 09/28/2022   Page: 1 of 12

                                        [DO NOT PUBLISH]
                            In the
         United States Court of Appeals
                 For the Eleventh Circuit

                   ____________________

                         No. 21-11985
                   Non-Argument Calendar
                   ____________________

In Re:
THE DIAMOND TRUST
u/a/d 10/28/2005
WARREN DIAMOND,
as Trustee of the Diamond Trust u/a/d October 28, 2005,
FAITH DIAMOND,
as Trustee of the Diamond Trust u/a/d October 28, 2005,
                         Plaintiffs-Counter Defendant-Appellees
                                               Cross Appellants,
versus
SCOTT DIAMOND,
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2                         Opinion of the Court                      21-11985

                               Defendant-Counter Claimant-Appellant
                                                     Cross Appellee.

                        ____________________

            Appeals from the United States District Court
                for the Southern District of Florida
                D.C. Docket No. 9:16-cv-81923-BER
                      ____________________

Before ROSENBAUM, GRANT, and BLACK, Circuit Judges.
PER CURIAM:
       Scott Diamond appeals the district court’s 1 Order of Default
Judgment against him in an action alleging breach of fiduciary duty,
accounting of the trust, unjust enrichment, conversion, fraud, and
unlawful interception of oral communication brought by Warren
and Faith Diamond. 2 Scott asserts the district court abused its dis-
cretion in entering a total default judgment as a sanction for dis-
covery violations. Warren and Faith cross appeal the district
court’s denial of punitive damages, alleging the district court

1 The parties consented to a magistrate judge conducting all proceedings pur-
suant to 28 U.S.C. § 636(c), and the magistrate judge entered the orders on
appeal.
2 Warren is Scott’s father and Faith is Warren’s spouse and Scott’s stepmother.
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21-11985                  Opinion of the Court                               3

abused its discretion by applying the wrong legal standard. After
review, 3 we affirm the district court.
                           I. BACKGROUND
       On October 28, 2005, Warren and Scott executed the Dia-
mond Trust and appointed Scott as the trustee. The Trust gave
Warren the right to amend or revoke the Trust without the con-
sent of the trustee. On July 7, 2015, Warren executed an amend-
ment to the Trust, appointing Faith as co-trustee with Scott. One
month later, Warren executed another amendment, removing
Scott as a trustee and leaving Faith as the sole trustee. On October
10, 2016, Warren filed suit in Florida state court against Scott for
actions related to Scott’s role as trustee. Scott then removed the
action to federal court in the Southern District of Florida.
       The Second Amended Complaint includes the following
claims against Scott : (1) breach of fiduciary duty, (2) demand for
accounting, (3) unjust enrichment, (4) conversion, (5) fraud, and
(6) violation of Florida Statute § 943.03. Warren alleges that in No-
vember 2015, after Scott was removed as trustee, Scott unilaterally

3 We review both the district court’s sanction of default judgment and the
decision to deny punitive damages for abuse of discretion. Winn-Dixie Stores,
Inc. v. Dolgencorp, LLC , 746 F.3d 1008, 1035 (11th Cir. 2014); Adolph Coors
Co. v. Movement Against Racism & the Klan, 777 F.2d 1538, 1542 (11th Cir.
1985). “A district court abuses its discretion if it applies an incorrect legal
standard, follows improper procedures in making the determination, or makes
findings of fact that are clearly erroneous.” Vega v. T-Mobile USA, Inc., 564
F.3d 1256, 1264 (11th Cir. 2009) (quotation marks omitted).
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4                          Opinion of the Court                        21-11985

entered into a refinancing agreement for property held by the
Trust, and on behalf of the Trust, and personally received approxi-
mately $500,000 as a result of the unauthorized transaction. In
turn, Scott asserted six affirmative defenses and counterclaims for
entitlement to trustee’s fees and unjust enrichment.
        During discovery, Warren served requests for production
on Scott, seeking Scott’s audio recordings of Warren and others in-
volved in the refinancing agreement at issue. On January 25, 2018,
Scott objected that this request was unduly burdensome but stated
he would produce any relevant audio recordings that existed. In
both his amended response served on March 1, 2018 4 and second
amended response served on April 5, 2018, Scott claimed that he
was not aware of any audio recordings relevant to the claims or
defenses in the action, but if he became aware such recordings ex-
isted, he would produce them.
       Despite Scott claiming no such recordings existed, Warren’s
counsel became aware the recordings existed and were in Scott’s
possession because they were produced in another case in another
jurisdiction. 5 After an evidentiary hearing held on September 18,

4 We GRANT Appellees’ unopposed motion to supplement the record on ap-
peal with a copy of the September 18, 2018 Discovery Memorandum and the
Amended Responses.
5 The magistrate judge did not have the parties submit on the record every-
thing that was obtained during discovery. However, Scott is not challenging
the facts as stated by the district court, only whether the sanction of dismissing
the whole case was appropriate.
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21-11985              Opinion of the Court                       5

2018, the magistrate judge entered a written order on September
24, 2018, ordering Scott to produce all recordings of Warren and
confirm his previous answers as to recordings of other people in-
volved in the refinancing. The magistrate judge ordered that if
there were recordings, they should be produced within five days of
the order, and that if any of the recordings no longer existed or
were no longer in Scott’s possession, Scott must provide a report
under seal identifying who made the recordings, the location of the
participants, the location where the recording was made, which
participants, if any, had knowledge of the recording, and the date
and time of the recording.
       On October 15, 2018, Scott served his Third Amended Re-
sponses to the requests for production. In that response, Scott as-
serted “that he has produced all audio recordings of Warren Dia-
mond in his possession, custody, or control which may concern the
Trust and/or issue related to this lawsuit.” He also claimed that
despite being able to extract recordings of Warren from two
iPhones and a hard drive, a third iPhone had been disabled due to
multiple password attempts and to the extent such audio record-
ings existed on the third iPhone, no recordings could be extracted.
As to others involved in the refinancing, Scott asserted he had no
recordings in his possession, however it was possible there were
recordings on the third iPhone he was unable to unlock.
       However, more recordings of Warren and recordings of
others involved in the refinancing existed, and in October and No-
vember of 2019—over a year after the magistrate judge’s order—
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6                      Opinion of the Court                 21-11985

Scott produced at least 20 more recordings. His reason for the late
production was that he “did not look for these . . . calls.” Addition-
ally, Scott did not produce the report of recordings in response to
the September 24, 2018 order until November 22, 2019.
       Moreover, on January 28, 2019, the magistrate judge or-
dered Scott to turn over “the subject cellular phones, hard drives,
and storage or backup facilities or devices” to Warren’s expert for
inspection. Scott failed to fully comply and later testified that he
had two computers in Red Bank, New Jersey and backups of his
locked iPhone that were not turned over pursuant to the order.
After Scott turned over certain devices to Warren pursuant to the
January 28, 2019, order, Warren found other recordings on the de-
vices that had not been produced nor detailed pursuant to the Sep-
tember 24, 2018, order.
       Based on the violations and discovery abuses, Warren and
Faith filed a motion for sanctions, requesting the magistrate judge
strike Scott’s counterclaim and enter a default judgment in their
favor. The magistrate judge granted the motion and dismissed
Scott’s counterclaim. Warren then filed a motion for Final Default
Judgment, and the court held an evidentiary hearing on monetary
damages. The magistrate judge entered default judgment against
Scott as to liability on all six counts and awarded $711,288.51 in
compensatory damages plus pre- and post-judgment interest. The
magistrate judge denied Warren and Faith’s request for punitive
damages, finding that Scott’s misconduct did not meet the required
level of reprehensibility as this was a private dispute between a
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21-11985               Opinion of the Court                        7

father and son that did not affect anyone’s health or safety, the
harm was economic, and Warren has extreme wealth and is not
financially vulnerable. The court found Scott’s actions “wrongful,”
but found they “lack[ed] the reprehensibility required for a punitive
damages award. The Court views many of Scott’s actions as a mis-
guided approach to protect himself from the actions and inactions
of his father, and a flawed attempt to strike a balance as a manager
of certain entities, trustee, and son to Warren.”
                         II. DISCUSSION
A. Total Default Judgment as Sanction
       Scott contends the district court abused its discretion in en-
tering a total default judgment as a sanction for discovery viola-
tions where the violations pertained to only one count of the six-
count complaint and the remaining counts did not depend on the
recorded conversations.
        Under Federal Rule of Civil Procedure 37(b)(2)(A), a district
court may sanction a party who fails to obey an order to provide
or permit discovery. Possible sanctions include striking pleadings,
dismissing the action in whole or part, or rendering a default judg-
ment against the disobedient party. Fed. R. Civ. P. 37(b)(2)(A). A
sanction of default judgment requires a finding of willfulness or bad
faith—simple negligence, misunderstanding or inability to comply
is not sufficient. Malautea v. Suzuki Motor Co., Ltd., 987 F.2d 1536,
1542 (11th Cir. 1993). Moreover, a default judgment is appropriate
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8                      Opinion of the Court                 21-11985

only as a “last resort, when less drastic sanctions would not ensure
compliance with the court’s orders.” Id.
       The district court did not abuse its discretion when it im-
posed the sanction of default judgment against Scott for his re-
peated misrepresentations. The magistrate judge correctly found
that Scott’s failure to comply with the discovery orders was willful.
Scott knew he possessed recordings of Warren because he pro-
duced them in another case. Scott repeatedly represented that he
had no recordings of Warren when he would later produce over
100 recordings. Even after amending his discovery responses and
stating those 112 recordings were all that existed, Warren discov-
ered even more recordings after inspecting Scott’s devices pursuant
to court order.
        Scott also repeatedly asserted he had no recordings of the
others who were expressly named in the discovery requests and
were involved in the refinancing transaction. Despite requests for
these recordings and orders from the court to produce them, Scott
testified he “did not look for these . . . calls.” Moreover, Scott did
not comply with the court’s order to turn over his devices to War-
ren’s expert for inspection, specifically two computers in Red Bank,
New Jersey and backups of his locked iPhone. These devices were
encompassed in the court’s order to turn over “the subject cellular
phones, hard drives, and storage or backup facilities or devices” to
Warren’s expert. The magistrate judge’s willfulness finding was
supported by Scott’s repeated false claims that the recordings and
devices did not exist.
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21-11985               Opinion of the Court                        9

        Additionally, despite Scott’s argument the recordings were
only relevant to Count Six alleging unlawful recording under Flor-
ida law, the magistrate judge determined the recordings contained
evidence relevant to the 2015 refinancing, the structure of the refi-
nancing, Scott’s role as trustee, and his role as manager of entities
with the ability to consent to the refinancing. Our review of the
recordings shows they were related to the refinancing. The mag-
istrate judge determined if the evidence had been timely disclosed,
Warren would have conducted further discovery on the issues.
However, the trial date on the case had already been pushed back
many times and discovery was closed. Trial was set for only one
month past the magistrate judge’s order on sanctions. Thus, the
magistrate judge’s finding that Warren was prejudiced by Scott’s
violations was supported as those violations affected Warren’s abil-
ity to prepare effectively for trial.
       Finally, the magistrate judge found that lesser sanctions
would not serve the interests of justice as another continuance in
the case would potentially be futile as Scott had not yet fully pro-
duced the devices and recordings. The magistrate judge did not
abuse his discretion in finding “no sanction short of dismissal
would adequately punish Scott for his disregard for the Court’s
multiple orders.” Although Scott contends his affirmative defenses
had merit, “the probable merit of a litigant’s case does not preclude
the imposition of a default judgment sanction against that litigant.”
Malautea, 987 F.2d at 1544.
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10                      Opinion of the Court                 21-11985

      In sum, the district court did not abuse its discretion in or-
dering a total default judgment because of Scott’s “clear pattern of
repeated, willful disobedience of Court orders.”
B. Denial of Punitive Damages
       In their cross appeal, Warren and Faith assert the district
court abused its discretion when it applied the wrong legal standard
to deny them punitive damages. They assert the district court
committed legal error by conflating whether punitive damages
should be awarded at all with the factors to evaluate whether the
amount of an award is excessive. They assert they were entitled to
an award of punitive damages under Florida law.
       In a diversity case, we apply state substantive law to deter-
mine whether there was sufficient evidence of conduct warranting
punitive damages. Toole v. Baxter Healthcare Corp., 235 F.3d
1307, 1317 (11th Cir. 2000). Florida law provides a “defendant may
be held liable for punitive damages only if the trier of fact, based on
clear and convincing evidence, finds the defendant was personally
guilty of intentional misconduct or gross negligence.” Fla. Stat.
§ 768.72(2). “‘Intentional misconduct’ means that the defendant
had actual knowledge of the wrongfulness of the conduct and the
high probability that injury or damage to the claimant would result
and, despite that knowledge, intentionally pursued that course of
conduct, resulting in injury or damage.” Id. § 768.72(2)(a). “‘Gross
negligence’ means that the defendant’s conduct was so reckless or
wanting in care that it constituted a conscious disregard or indiffer-
ence to the life, safety, or rights of persons exposed to such
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21-11985               Opinion of the Court                      11

conduct.” Id. § 768.72(2)(b). “Under Florida law, the purpose of
punitive damages is not to further compensate the plaintiff, but to
punish the defendant for its wrongful conduct and to deter similar
misconduct by it and other actors in the future.” Myers v. Central
Fla. Inv., Inc., 592 F.3d 1201, 1216 (11th Cir. 2010).
       Three considerations guide whether an award of punitive
damages is unconstitutionally excessive: “(1) the degree of repre-
hensibility of the defendant’s misconduct; (2) the disparity between
the actual or potential harm suffered by the plaintiff and the puni-
tive damages award; and (3) the difference between the punitive
damages awarded by the jury and the civil penalties authorized or
imposed in comparable cases.” Engle v. Liggett Grp., Inc., 945 So.
2d 1246, 1264 (Fla. 2006) (quoting State Farm Mut. Auto. Ins. Co.
v. Campbell, 538 U.S. 408, 418 (2003)).
        The district court did not abuse its discretion in denying
Warren and Faith punitive damages. The district court cited the
Florida law regarding intentional misconduct or gross negligence.
Although the magistrate judge did not make an explicit finding that
Scott’s misconduct was intentional or grossly negligent in his dis-
cussion of punitive damages, the finding that Scott’s misconduct
was intentional or grossly negligent can be inferred by the magis-
trate judge’s determination that Scott’s misconduct was “wrongful
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12                         Opinion of the Court                       21-11985

but lack[ed] the reprehensibility required for a punitive damages
award.” 6
        Warren and Faith essentially argue that because they are en-
titled to punitive damages under Florida law, it was error for the
district court not to award them. But Florida’s statute regarding
entitlement to punitive damages is permissive, not mandatory. See
Fla. Stat. § 768.72(2) (stating a “defendant may be held liable for
punitive damages only if the trier of fact, based on clear and con-
vincing evidence, finds the defendant was personally guilty of in-
tentional misconduct or gross negligence” (emphasis added)). The
statute does not say punitive damages must be awarded.
       Warren and Faith’s arguments regarding the denial of puni-
tive damages fail. The district court did not abuse its discretion in
denying punitive damages.
        AFFIRMED.

6 Warren and Faith do not argue the district court’s reprehensibility analysis
was incorrect, only that the district court should have explicitly found entitle-
ment and that this entitlement mandates some amount of punitive damages.
Thus, we do not review the district court’s finding that the requisite level of
reprehensibility was not present in this case. See Access Now, Inc. v. South-
west Airlines Co., 385 F.3d 1324, 1330 (11th Cir. 2004) (explaining “the law is
by now well settled in this Circuit that a legal claim or argument that has not
been briefed before the court is deemed abandoned and its merits will not be
addressed”).