United States District Court, S.D. California
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR RULE 37 SANCTIONS AGAINST DEFENDANTS IMS-NEW JERSEY, IMS-TEXAS, IMS-GEORGIA, IMS-FLORIDA, AND IMS-MIAMI [ECF NO. 79]
RUBEN B. BROOKS, Magistrate Judge.
Plaintiff Steinar Myhre's Motion for Rule 37 Sanctions Against Defendants IMS-New Jersey, IMS-Texas, IMS-Georgia, IMS-Florida, and IMS-Miami [ECF No. 79] ("Motion for Sanctions") was filed on May 16, 2014. Defendants filed a response in opposition [ECF No. 82], and Myhre filed a reply [ECF No. 84].
The hearing on the motion was set for June 16, 2014. The Court determined the matter to be suitable for resolution without oral argument, submitted the motion on the parties' papers pursuant to the Local Civil Rule 7.1(d), and vacated the motion hearing. (Mins., June 13, 2014, ECF No. 87.) For the following reasons, Plaintiff's Motion for Sanctions is GRANTED in part and DENIED in part.
I. FACTUAL BACKGROUND
On November 14, 2013, Plaintiff Steinar Myhre filed a Complaint against Defendants Seventh-Day Adventist Church Reform Movement American Union International Missionary Society, a New Jersey Corporation ("IMS-NJ") and International Missionary Society Seventh Day Adventist Church Reform Movement General Conference ("IMS-GC"), alleging breach of contract, breach of the covenant of good faith and fair dealing, fraud, interference with contract, conversion, and civil conspiracy. (Compl. 1-2, ECF No. 1.) Plaintiff is a retired pastor who seeks money damages and injunctive relief for the alleged termination of his pension benefits by his former employer. ( Id. at 3.) Myhre claimed that he was forced to retire over a theological disagreement in 2009; by then, he had worked for Defendants for over twenty-seven years as an ordained minister. ( Id. at 3-5.) Plaintiff stated that his retirement payments ceased in 2013. ( Id. at 9-10.)
Myhre alleged that he resides in Colorado and that Defendant IMS-NJ is a New Jersey corporation headquartered in Georgia and doing business in various states, including the State of California and the County of San Diego. ( Id. at 2.) Plaintiff claimed that Defendant IMS-GC is a California corporation headquartered in Georgia and doing business in various states, including the State of California. (Id.) On January 6, 2014, Plaintiff amended his Complaint, adding five more Defendants: (1) The Seventh-Day Adventist Church Reform Movement American Union International Missionary Society, a Texas corporation ("IMS-TX"); (2) The Seventh-Day Adventist Church Reform Movement American Union IMS, Inc., a Georgia corporation ("IMS-GA"); (3) Miami Dade Area Seventh-Day Adventist Church Reform Movement, International Missionary Society Inc., a Florida corporation ("IMS-Miami"); (4) The Seventh-Day Adventist Church Reform Movement American Union International Missionary Society, a Florida corporation ("IMS-FL"); and (5) Tampa Bay Area Seventh Day Adventist Church Reform Movement, International Missionary Society Inc., a Florida corporation ("IMS-Tampa"). (Am. Compl. 2-3, ECF No. 15.)
Myhre's Amended Complaint states that "Defendant entities are part of a singular, hierarchical church organization that collectively conducts business throughout the United States and the world, with each level answerable to, and controlled by, higher levels of the organization." ( Id. at 3.) Referring to all Defendants collectively as "IMS, " Plaintiff also alleged, on information and belief, that "Defendant IMS has officially registered as a non-profit religious organization in the United States via a single entity reference, specifically, International Missionary Society Seventh-Day Adventist Church, ' EIN XX-XXXXXXX, without any reference therein to either American Union' or General Conference.'" (Id.) In the Amended Complaint, Myhre also asserts:
15. Defendants IMS-AU-NJ, IMS-Tampa, IMS-AU-TX, IMS-AU-GA, IMS- Miami, and IMS-AU-FL are indistinguishable for purposes of liability under the facts of this case, and are treated as a single entity by Plaintiff herein, collectively referred to as "Defendant American Union" unless otherwise specified in this Amended Complaint.
16. Upon information and belief, and based on admissions of Defendants, Defendant American Union has not maintained any principal place of business anywhere for almost 30 years. However, Defendant American Union has churches located in various states, including five churches in California, five in Florida, three in Georgia, two each in New York and Texas, and one each in Illinois, Colorado, New Jersey, Rhode Island, Virginia, and Washington DC.
(Id. at 3-4.)
Myhre alleged that jurisdiction is proper in this Court pursuant to 28 U.S.C. § 1332 because the parties are citizens of different states and the amount of controversy exceeds $75, 000. ( Id. at 4.) Plaintiff claimed that venue is proper in this district "because Defendant American Union resides in this district (by virtue of being registered to do business in California, having a church located in Vista, CA in the Southern District of California, and having further personnel located in Oceanside, CA)...." (Id.)
Currently pending before United States District Court Judge Cynthia A. Bashant are four motions to dismiss filed by the Defendants [ECF No. 81]. Defendant IMS-NJ's Motion to Dismiss for Lack of Subject Matter Jurisdiction or Improper Venue argues that because IMS-NJ's principal place of business is in Colorado, it is a citizen of Colorado and the case must be dismissed for lack of diversity jurisdiction. (Def. [IMS-NJ's] Mot. Dismiss Attach. #1 Mem. P. & A. 8, ECF No. 31.) In the alternative, IMS-NJ argues that the case must be dismissed for improper venue because not all of the corporate Defendants are residents of California. ( Id. at 13-14.) Defendant IMS-GC moves to dismiss for failure to state a claim, arguing that Plaintiff fails to allege any facts against it. (Def. [IMS-GC's] Mot. Dismiss Attach. #1 Mem. P. & A. 6, ECF No. 32.) IMS-GC also claims that it is a California corporation with a principal place of business in Georgia, and it seeks dismissal for improper venue or transfer to the Northern District of Georgia. ( Id. at 11-14.)
Defendants IMS-TX, IMS-GA, IMS-Miami and IMS-FL filed a Motion to Dismiss for Lack of Subject Matter Jurisdiction or Improper Venue, arguing that both IMS-GA and IMS-FL are citizens of Colorado for purposes of diversity jurisdiction. (Defs. [IMS-TX, IMS-GA, IMS-Miami & IMS-FL's] Mot. Dismiss Attach. #1 Mem. P. & A. 12, ECF No. 34.) Finally, Defendant IMS-Tampa filed a Motion to Dismiss for Improper Venue or, in the Alternative, to Transfer; it claims that transfer to Florida is proper because its principal place of business is in Florida. (Def. [IMS-Tampa's] Mot. Dismiss Attach. #1 Mem. P. & A. 6, ECF No. 39.) In the alternative, it moves to transfer this case to Georgia because IMS-NJ's principal place of business is in Georgia. (Id.)
In response to Defendants' challenges to jurisdiction and venue, Plaintiff served discovery requests and subsequently brought a Motion to Compel seeking production of documents and interrogatory answers related to the citizenship of IMS-NJ, IMS-GA, and IMS-FL for diversity jurisdiction, as well as the Defendants' contacts with the Southern District for purposes of venue. (Pl.'s Mot. Compel Attach. #1 Mem. P. & A. 7-8, ECF No. 42.) Myhre also requested Defendants' corporate documents to ascertain whether Defendants observed corporate formalities to withstand allegations that they are alter egos of each other. (Id.) Plaintiff sought to depose Henry Dering, IMS-NJ's vice president, and the president or secretary of IMS-TX. (Id.) The Court granted in part Plaintiff's motion on April 17, 2014, and set the deadline for compliance with the Order for May 8, 2014. (Order Granting & Den. Pl.'s Mot. Compel Jurisdictional Disc. 33, ECF No. 67.)
In his Motion for Sanctions, Myhre alleges that Defendants' supplemental discovery responses served on May 8 and May 9, 2014, were "materially non-compliant with the Court's discovery order." (Pl.'s Mot. Sanctions Attach. #1 Mem. P. & A. 5,  ECF No. 79.) Myhre seeks various issue sanctions as well as the attorney's fees associated with bringing this motion. (Id.)
II. LEGAL STANDARDS
Rule 37 of the Federal Rules of Civil Procedure enables the propounding party to bring a motion to compel responses to discovery requests. Fed.R.Civ.P. 37(a)(3)(B). Rule 37(a)(5) authorizes the imposition of sanctions against the party whose conduct necessitated the motion to compel. The rule authorizes the Court to issue the following types of sanctions against a party who fails to obey an order to provide or permit discovery:
(i) directing that the matters embraced in the order or other designated facts be taken as established for purposes of the action, as the prevailing party claims;
(ii) prohibiting the disobedient party from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence;
(iii) striking pleadings in whole or in part;
(iv) staying further proceedings until the order is obeyed;
(v) dismissing the action or proceeding in whole or in part;
(vi) rendering a default judgment against the disobedient party; or
(vii) treating as contempt of court the failure to obey any order except an order to submit to a physical or mental examination.
Fed. R. Civ. P. 37(b)(2)(A). Furthermore, Rule 37(b)(2)(C) provides that "[i]nstead of or in addition to the orders above, the court must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust." Id . "By the very nature of its language, sanctions imposed under Rule 37 must be left to the sound discretion of the trial judge." O'Connell v. Fernandez-Pol, 542 F.App'x 546, 547-48 (9th Cir. 2013) (citing Craig v. Far West Eng'g Co., 265 F.2d 251, 260 (9th Cir. 1959)).
In addition, federal courts have inherent power to impose sanctions against both attorneys and parties for "bad faith" conduct in litigation or for "willful disobedience" of a court order. Chambers v. NASCO, Inc., 501 U.S. 32, 45 (1991); Roadway Express, Inc. v. Piper, 447 U.S. 752, 764-66 (1980). The Court may assess attorney fees or other sanctions under its inherent power for the "wilful disobedience of a court order." Chambers, 501 U.S. at 45 (citing Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 258 (1975)). A fee award under the Court's inherent power is meant to vindicate judicial authority, rather than to provide a substantive remedy to an aggrieved party: "The wrong done was to the court." Mark Indus., Ltd. v. Sea Captain's Choice, Inc., 50 F.3d 730, 733 (9th Cir. 1995).
Plaintiff moves the Court for sanctions under the Federal Rule of Civil Procedure 37 against Defendants IMS-NJ, IMS-TX, IMS-GA, IMS-FL, and IMS-Miami because of their failure to comply with the Court's April 17, 2014 Order Granting in Part and Denying in Part Plaintiff's Motion to Compel Jurisdictional Discovery [ECF No. 67]. (Pl.'s Mot. Sanctions Attach. #1 Mem. P. & A. 4-5, ECF No. 79.) Myhre alleges that the supplemental discovery responses Defendants provided were not in compliance with the Court's discovery order. ( Id. at 5.) Based on this, Plaintiff requests the following sanctions:
1. Prohibiting these Defendants from opposing Plaintiff's allegations that they are alter egos of each other for purposes of this case;
2. Prohibiting these Defendants from opposing diversity jurisdiction over this case;
3. Prohibiting these Defendants from contesting venue of this case; and
4. Attorney's fees in an amount... caused by Defendants' non-compliance with the subject discovery order.
(Id.) Myhre argues that because the documents Defendants failed to produce relate to their corporate structure, as well as the disputed issues of jurisdiction and venue, Defendants should be precluded from challenging Plaintiff's alter ego allegations, contesting venue, and disputing subject matter jurisdiction in this case. (Id.) Plaintiff also seeks attorney's fees in the amount of $6, 297.50 incurred as a result of Defendants' failure to comply with the Court's discovery order. (Pl.'s Reply 11, ECF No. 84.)
A. Failure to Produce Documents Due to Counsel's Oversight
The Court's jurisdictional discovery order addressed Plaintiff's requests for production which Defendants had not opposed. (Order Granting & Den. Pl.'s Mot. Compel Jurisdictional Disc. 31, ECF No. 67.) Under "Unopposed Requests, " the Court ordered production of the following corporate records: (1) bylaws or governing documents for Defendants IMS-TX (request number two), IMS-GA (request number two), IMS-FL (request number two), and IMS-Miami (request number two); (2) articles of incorporation and any amendments for Defendants IMS-FL (request number one) and IMS-Miami (request number one); (3) corporate records reflecting election of directors and/or officers since incorporation for Defendants IMS-TX (request number three), IMS-FL (request number three), and IMS-Miami (request number three); and (4) annual reports filed with any secretary of state since the date of incorporation for Defendants IMS-FL (request number four) and IMS-Miami (request number four). (Id.)
Defendants concede that they failed to produce the documents specified in this section of the Court's Order but claim that it was due to their counsel's oversight. (Defs.' Opp'n Mot. Sanctions Attach. #1 Decl. Wade 3, ECF No. 82.) They represent that it was a "good faith mistake that defendants are urgently trying to remedy[, ]" and they "fully expect to provide all responsive documents in their possession from the "Unopposed Requests" section of the Order as soon as possible and prior to the [June 16, 2014] hearing on this motion." (Defs.' Opp'n Mot. Sanctions 4,  ECF No. 82.)
Defendants had not opposed these requests. It is unclear whether this failure to oppose was also due to counsel's oversight. Myhre's Motion to Compel, however, explained that Defendants had promised, but failed to provide, the responsive documents. (Pl.'s Mot. Compel Attach. #1 Mem. P. & A. 12, ECF No. 42.) At the very least, Defendants were aware of these requests on March 5, 2014, when the Motion to Compel was filed, if not before. Defendants' attorneys do not contend that the first time they were put on notice regarding these requests was after the May 8, 2014 deadline to supplement ...