The opinion of the court was delivered by: Dean D. Pregerson United States District Judge
Order to Show Cause Regarding Contempt Sanctions [Motion for Sanctions filed on October 20, 2009]
This matter comes before the Court on the Plaintiffs' motion for post-judgment discovery sanctions. Having considered the materials submitted and the issues raised therein, the Court adopts the following order.
On June 28, 2006, Plaintiffs filed a malicious prosecution action against Defendants Craig Soroudi ("Soroudi") and James Hodges. (Dkt. No. 1.) The Court entered a default judgment against all Defendants on December 5, 2006, including $1,000,000 in punitive damages, in part due to Soroudi's use of the court system to defraud insurance companies. (Dkt. No. 40.) On March 17, 2008, the Court granted a motion to vacate the default judgment as to Defendant MGM Productions Group, Inc., based on improper service of the original Complaint to Defendant Hodges as the company's agent. (Dkt. No. 188.)
On October 21, 2008 the Court granted summary judgment against two companies with the name MGM Corporations Group, Inc. - one in Canada, the other in California. (Dkt. No. 306.) Plaintiffs subsequently filed post-judgment interrogatory requests on the MGM companies and its counsel, Heather M. Kadeg, designed to assist in collecting the judgment. On July 2, 2009, the Court ordered "Defendants to submit responsive answers to Plaintiff's post-judgment discovery interrogatories within 30 days of the date of this order." (Dkt. No. 354.) The Court denied Plaintiff's request for sanctions in the amount of $1,000 per day against the MGM companies until they provide answers to Plaintiff's interrogatories, because the Court declined "to speculate whether Defendants will comply with this Court's orders." (Id.) On July 27, 2009, Kadeg moved to withdraw as counsel of record for Defendant Soroudi and MGM. On September 2, 2009, the Court granted her motion to withdraw because "her clients have refused to respond to her attempts to contact them since March 19, 2009." (Dkt. No. 360.)
Plaintiffs now ask this Court to impose a constructive trust and sanctions in the amount of $1,000 per day against Defendants until they comply with the Court's order to compel discovery. Plaintiffs argue that these remedies are appropriate because "MGM has stated unequivocally, both through its words and its actions that it does not intend to comply with this court's discovery order." (Mot. 7:26-27.)
Federal courts have inherent power to impose sanctions against parties for "willful disobedience of a court's order." Chambers v. NASCO, Inc., 501 U.S. 32, 46 (1991); see also Air Separation, Inc. v. Underwriters at Lloyd's of London, 45 F.3d 288, 291 (9th Cir. 1995) (court's power to sanction for willful disobedience of a court order is essentially discretionary). However, the power must be exercised with restraint and discretion, and the sanctions must be appropriate to the misconduct. Roadway Express, Inc. v. Piper, 447 U.S. 752 (1980).
Because of the punitive nature of a contempt order and accompanying monetary sanctions, clear and convincing evidence of abusive conduct is required; a preponderance of the evidence is not enough. Shepherd v. Am, Broad. Cos., 62 F.3d 1469 (D.C. Cir. 1995). Deciding the amount of the monetary sanctions assessed against the contemnor is committed to the trial court's sound discretion, and is reviewable only for abuse of discretion. General Signal Corp. v. Donallco, Inc., 787 F.2d 1376, 1380 (9th Cir. 1986). More specifically, the court may impose such sanctions as are necessary to compensate the innocent party, to vindicate the affront to the court, and to ensure that such abuses are not repeated. Chambers, 501 U.S. at 56-7.
The court may impose sanctions upon a party's motion or sua sponte. Roadway Express, 447 U.S. at 765. The party against whom sanctions are being considered must be noticed. In re Tutu Wells Contamination Litig., 120 F.3d 368 (3d Cir. 1997). Next, an opportunity to be heard is required, in order to determine whether parties or their counsel acted in bad faith. Oregon RSA No. 6, Inc. v. Castle Rock Cellular of Or. Ltd. P'ship, 76 F.3d 1003 (9th Cir. 1996). The opportunity to be heard does not require an oral or evidentiary hearing on the issue. Rather, the opportunity to fully brief the issue satisfies due process requirements. Pac. Harbor Capital, Inc. v. Carnival Air Lines, Inc., 210 F.3d 1112, 1118 (9th Cir. 2000) (citing Resolution Trust Corp. v. Dabney, 73 F.3d 262 (10th Cir. 1995)).
Since the Defendants have filed no opposition or objections to the Plaintiffs' motion for post-judgment discovery sanctions, the Court hereby issues an order to show cause why the Court should not hold Defendants in contempt pursuant to Federal Rule of Civil Procedure 37(b)(2)(A)(vii), and why sanctions should not issue against the Defendants.
IT IS HEREBY ORDERED that Defendant MGM Productions show cause why Plaintiffs' motion for contempt sanctions should not be granted within ten (10) days of the date of this Order. Plaintiffs may file a reply, if they wish to do so, within seven ...