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Dolarian Capital, Inc v. Soc

December 6, 2012

DOLARIAN CAPITAL, INC., PLAINTIFF,
v.
SOC, LLC,
DEFENDANT.



The opinion of the court was delivered by: Dennis L. Beck United States Magistrate Judge

ORDER RE: MOTION FOR RULE 37 SANCTIONS (Doc. 60) ORDER RE: THIRD MOTION FOR RULE 37 SANCTIONS (Doc. 79)

On October 5, 2012, Defendant SOC, LLC ("Defendant" or "SOC") filed a motion for sanctions based on the alleged failure of Plaintiff Dolarian Capital, Inc. ("Plaintiff" or "DCI") to abide by its discovery obligations and the Court's September 12, 2012 order. Doc. 60. On November 19, 2012, Defendant filed a third motion for sanctions based on Plaintiff's alleged pattern of discovery misconduct. Doc. 79. The motions were heard on December 5, 2012, before the Honorable Dennis L. Beck, United States Magistrate Judge. Brad Bloodworth and Joseph Davis appeared on behalf of Defendant. Myron Smith appeared on behalf of Plaintiff.

INTRODUCTION

In January 2011, Plaintiff filed this breach of contract action regarding the sale of guns and ammunition for use in Iraq and/or Afghanistan. According to the complaint, Plaintiff apparently agreed to procure and sell guns and ammunition to Defendant and to ship the weapons and ammunition to Afghanistan. The weapons and ammunition to fulfill the contract were located in Bulgaria and other Eastern European locations. Plaintiff reportedly requested documentation from Defendant to secure licensing and clearance for the purchase and shipment of the weapons. Subsequently, Defendant informed Plaintiff that it was canceling the purchase orders for the weapons. However, Plaintiff had acquired weapons to fulfill the terms of the contract.

Defendant answered the complaint and counterclaimed for breach of contract. By its counterclaim, Defendant asserts that Plaintiff falsely represented that it was lawfully registered with the Department of State as a broker of articles of war, falsely represented that it brokered large sales of automatic weapons from Eastern Europe all the time, falsely represented that it was capable of delivering large weapons orders in less than two months and falsely represented that it would deliver new weapons and ammunition. After Defendant provided a 50% pre-payment, Plaintiff failed to deliver any weapons or ammunition. Defendant later learned that Plaintiff was not a licensed weapons broker, had no possibility of obtaining governmental approvals to import/export large quantities of automatic weapons and had no intention of delivering certain new weapons.

DISCUSSION

I.Motion for Sanctions (Doc. 60)

A. Background

On August 1, 2012, Defendant filed a motion to compel Plaintiff to provide responses to requests for production and interrogatories. According to Defendant, Plaintiff failed to produce any documents, refused to admit or deny any of the requests for admission and refused to answer any interrogatories.

On September 12, 2012, the Court granted the motion to compel and ordered Plaintiff to provide supplemental responses to Defendant's interrogatories and to produce all non-privileged material responsive to the requests for production no later than September 21, 2012. The Court also expressly ordered Plaintiff to provide a response to each request for production that specifically stated (1) Plaintiff is producing all responsive documents; (2) Plaintiff has no responsive documents in its possession, custody or control; or (3) Plaintiff's discovery responses are protected by privilege.*fn1

At some point, Plaintiff supplemented its document production. Believing that Plaintiff's supplemental production duplicated previous productions and failed to comply with the Court's order, Defendant filed the instant motion for sanctions.

In its moving papers, Defendant asks the Court to grant the motion and (1) preclude Plaintiff from introducing any evidence, information, or witnesses at trial that Plaintiff has not already disclosed in its previous productions or Rule 26 disclosures, (2) impose monetary sanctions by ordering Plaintiff to reimburse Defendant for the fees and expenses incurred in bringing the motion, and (3) order any further relief deemed just and appropriate. Defendant also asks the Court to admonish Plaintiff that continued non-compliance with its discovery obligations and the Court's orders could result in issue sanctions or terminating sanctions.

On November 1, 2012, Plaintiff filed an opposition to the sanctions motion, stating that it had complied with the discovery requests, had produced the requested documents more than once and had produced documents in its possession, custody or control that are responsive to the requests. Plaintiff reports that it provided approximately 1,000 pages of documents to Defendant on September 11, 2012. Following the Court's order, Defendant provided a supplemental response, which included the previously produced documents with a Bate stamp and a chart indicating which documents were responsive to each discovery request. Plaintiff provided another copy of the 1,000 pages at depositions during the week of October 17, 2012.

Defendant filed a reply on November 6, 2012, asking the Court to issue terminating sanctions. In the reply, Defendant asserts that Plaintiff essentially made no effort to comply with the Court's order. Defendant states that Plaintiff's President and CEO, Ara Dolarian, admitted in his deposition that he had not searched for any records after the Court's September 12 order and that Plaintiff's bookkeeper Stephen Mar admitted that he had not been asked to search for any documents. Exhibits A and B to Declaration of Brad Bloodworth ("Bloodworth Dec.).

Defendant further asserts that Plaintiff clearly has not produced critical documents responsive to Defendant's discovery requests. Defendant explains that deposition testimony and an investigation revealed that the Department of Homeland Security ("DHS") seized approximately 22,000 pages of documents from Plaintiff's Fresno office on April 23, 2012. An Assistant United States Attorney for District of Arizona returned copies of those documents to Plaintiff's counsel, Jan Hanzlik of Venable LLP on June 22, 2012. Ex. D. to Bloodworth Dec. Defendant did not discover the seizure of documents until the deposition of Mr. Mar, who testified that agents seized files related to the underlying transaction, including purchase orders, invoices evidencing payments to third parties to acquire weapons, bank statements and the fulfillment file for the transaction at issue. Exhibit A to Bloodworth Dec. Mr. Dolarian confirmed that documents relevant to the transaction were among those seized, including the fulfillment file. According to Defendant, Plaintiff has not produced any of the identified, relevant documents.

In addition to the above, Defendant also alleges that Mr. Dolarian testified falsely in an effort to hide Plaintiff's violation of the Court's September 12, 2012 order. According to Defendant, Mr. Dolarian testified on October 19, 2012, that Plaintiff was unable to produce certain responsive documents because they were among "22,000 pieces of paper" confiscated by DHS during the raid in February 2012. Mr. Dolarian claimed that DHS had not returned hard copy documents to Plaintiff, but Venable was in the process of getting them from DHS. Exhibit B to Bloodworth Dec. However, Mr. Dolarian later conceded that DHS had returned electronic copies of the seized documents to Venable and Venable reportedly had refused to provide the CD copy of documents despite his requests. Exhibit C to Bloodworth Dec. Defendant apparently confronted Mr. Dolarian during his individual deposition with a statement from DHS Agent David Royer indicating that electronic copies of the seized documents were returned to Plaintiff on June 22, 2012. Bloodworth Dec.¶ ¶ 6-7.

As a final argument, Defendant asserts that Plaintiff's opposition confirms violation of the Court's September 12 order. According to Defendant, Plaintiff's opposition: (1) conceded that the "supplemental" production in response to the Court's order was nothing more than a repackaging of the same documents that had already been produced; (2) inaccurately claimed that Defendant had received all documents within Plaintiff's control despite existence of the CD with electronic copies received by Venable, which were not produced; (3) included a misleading declaration from Plaintiff's counsel, which identified a limited production of documents "in the possession" (versus custody and control) of ...


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