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Sinclair v. Fox Hollow of Turlock Owners Association

United States District Court, E.D. California

August 29, 2014

RICHARD SINCLAIR, et al., Plaintiffs,


STANLEY A. BOONE, Magistrate Judge.

Currently before the Court are Defendant Richard Sinclair's motion for leave to amend the scheduling order, Defendant Stanley Flake's motion for leave to amend the scheduling order, and Plaintiff Fox Hollow's motion for sanctions.

The Court heard oral argument on August 27, 2014. Counsel Greg Durbin and Daniel Cho appeared for Plaintiffs and Counsel Janlynn Fleener appeared telephonically for Defendant Flake, Branden Sinclair appeared telephonically in pro per and Richard Sinclair appeared telephonically in pro per and for Defendants Capstone and Lairtrust. Having considered the moving, opposition and reply papers, the declarations and exhibits attached thereto, arguments presented at the August 27, 2014 hearing, as well as the Court's file, the Court issues the following findings and recommendations.



The history of this action is set forth in District Judge Anthony Ishii's order issued March 31, 2014 and will not be repeated here. (Order 1-4, ECF No. 1014.) Suffice it to say that this ligation has been contentious and has resulted in numerous motions and the threat of and imposition of sanctions against the parties. At this juncture, the only issue remaining is the consolidated second amended complaint filed July 21, 2010 against Mauctrst LLC, Gregory Mauchley, Richard Sinclair, Stanley Flake (individually and as trustee of the Julie Insurance Trust and Capstone Trust), Brandon Sinclair, Lairtrust LLC, and Capstone LLC. Plaintiffs have settled with Defendants Mauctrst and Gregory Mauchley. For the purposes of these motions, the remaining defendants shall be referred to as the Sinclair Defendants (Richard and Brandon Sinclair, Lairtrust and Capstone) and the Flake Defendants (Stanley Flake individually and as trustee for the Julie Insurance Trust and the Capstone Trust).

Judge Ishii's March 31 order addressed multiple motions. As relevant here, Judge Ishii considered Plaintiffs' request for sanctions against Richard Sinclair for his failure to pay prior litigation sanctions and found that further monetary sanctions would be futile. Therefore, Judge Ishii found that litigation sanctions would be applied for any additional sanctions against Richard Sinclair in this action. (Id. at 4-5.)

The order refers to an order issued April 5, 2013, in which the Court found that Richard Sinclair had wilfully disobeyed orders of the Court on several occasions. Specifically, only Lairtrust had been granted leave to file a second amended complaint, however the second amended complaint named Lairtrust, Capstone, Las Palmas and Richard Sinclair as plaintiffs. (ECF No. 1014 at 5.) Secondly, the Court found that Lairtrust had been ordered to file a second amended complaint that clearly segregated the stayed claims from the non-stayed claims; however, the stayed claims were intermingled throughout the second amended complaint. (Id. at 6.) Lairtrust filed a third amended complaint that did not correct the problems identified. (Id.) Judge Ishii found "[g]iven the history of this case and Richard Sinclair's flouting of rules despite monetary sanction, this court is forced to conclude that dismissal is warranted. Lairtrust's Counterclaim is dismissed with prejudice." (Id.)

The order also addressed the Sinclair Defendants' refusal to follow orders requiring the production of documents. (ECF No. 1014 at 18-20.) Judge Ishii referred to a prior order issued by Judge Beck which addressed the Sinclair Defendants' refusal to comply with the discovery rules. (Id. at 19-20.) The Sinclair Defendants were warned that the failure to comply would likely result in the severe sanction of entry of default judgment in favor of Plaintiffs in this action. (Id. at 19-20.) The Sinclair Defendants were ordered to "comply with the relevant provisions of Fed. Rule Civ. Proc. 34(b)(2) and provide a signed response to each request that specifically states either (1) Defendants have no responsive documents in their possession, custody or control; or (2) Defendants are producing all responsive documents and specifically identify all documents produced for that request" without asserting privilege. (Id. at 20.) The Sinclair Defendants were ordered to provide a signed response to each discovery request within sixty days of the issuance of the order. (Id.)

On June 11, 2014, Richard Sinclair filed a motion for leave to amend the court schedule and requesting to reinstate his dismissed counterclaim claim. (ECF No. 1027.) On June 16, 2014, the Flake defendants filed a motion to amend the scheduling order to allow a dispositive motion and amended answer to be filed. (ECF No. 1030.) On June 26, 2014, Plaintiffs Fox Hollow and California Equity Management Group ("CEMG") filed a motion for sanctions to issue against the Sinclair Defendants for failure to obey a court order. (ECF No. 1032.)

On August 13, 2014, Richard and Brandon Sinclair filed an opposition to the motion for sanctions, the Flake defendants filed a statement of non-opposition to the Sinclair Defendants' motion to amend the scheduling order, and Plaintiff filed an opposition to both motions to amend the scheduling order. (ECF Nos. 1043-1050.) On August 20, 2014, Plaintiffs filed a reply to the Sinclair Defendants' opposition to the motion for sanctions and the Flake defendants filed a reply to Plaintiffs' opposition to his motion to amend the scheduling order. (ECF No. 1052, 1053-54.) On August 25, 2014, Richard Sinclair filed an untimely reply to Plaintiff's opposition to this motion to amend the scheduling order. (ECF No. 1055.) On August 26, 2014, Richard Sinclair filed an untimely supplemental reply. (ECF No. 1056.)



A. Amendment to Scheduling Order

Modification of a scheduling order requires a showing of good cause, Fed.R.Civ.P. 16(b), and good cause requires a showing of due diligence, Johnson v. Mammoth Recreations, Inc. , 975 F.2d 604, 609 (9th Cir. 1992). If the party seeking to amend the scheduling order fails to show due diligence the inquiry should end and the court should not grant the motion to modify. Zivkovic v. Southern California Edison, Co. , 302 F.3d 1080, 1087 (9th Cir. 2002). To allow a modification of the scheduling order without good cause would render scheduling orders essentially meaningless, and directly interfere with courts' attempts to manage their dockets and with the standard course of litigation in actions such as this. Johnson , 975 F.2d at 610 ("A scheduling order is not a frivolous piece of paper, idly entered...." (internal quotations and citation omitted)).

B. Reconsideration

"A motion for reconsideration should not be granted, absent highly unusual circumstances, unless the district court is presented with newly discovered evidence, committed clear error, or if there is an intervening change in the controlling law, " and it "may not be used to raise arguments or present evidence for the first time when they could reasonably have been raised earlier in the litigation." Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co. , 571 F.3d 873, 880 (9th Cir. 2009) (internal quotations marks and citations omitted) (emphasis in original). Pursuant to the Local Rules a motion for reconsideration must show "what new or different facts or circumstances are claimed to exist which did not exist or were not shown upon such prior motion, or what other grounds exist for the motion; and why the facts or circumstances were not shown at the time of the prior motion." L.R. 230(J)(3) and (4).

C. Sanctions

Rule 37(b)(2) of the Federal Rules of Civil Procedure provides that if a party fails to obey an order to provide or permit discovery, the court may issue further just orders, which may include the imposition of sanctions upon the disobedient party, including dismissal of the action or proceeding in whole or in part. Fed.R.Civ.P. 37(b)(2)(A). "[T]he 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." Fed.R.Civ.P. 37(b)(2)(C).

In the Ninth Circuit, sanctions are appropriate only in "extreme circumstances" and where the violation is "due to willfulness, bad faith, or fault of the party." Fair Housing of Marin v. Combs , 285 F.3d 899, 905 (9th Cir. 2002.) (quoting United States v. Kahaluu Constr. Co., Inc. , 857 F.2d 600, 603 (9th Cir.1988) (citations omitted)). Disobedient conduct not shown to be outside the litigant's control meets this standard. Hyde & Drath v. Baker , 24 F.3d 1162, 1167 (9th Cir.1994). In North Am. Watch Corp. v. Princess Ermine Jewels , 786 F.2d 1447, 1451 (9th Cir.1986), the Ninth Circuit held that "[b]elated compliance with discovery orders does not preclude the imposition of sanctions. Fair Housing of Marin , 285 F.3d at 905 (also citing Nat'l Hockey League v. Metro. Hockey Club, Inc. , 427 U.S. 639, 643, 96 S.Ct. 2778 (1976) (per curiam); G-K Props. v. Redevelopment Agency of the City of San Jose , 577 F.2d 645, 647-48 (9th Cir.1978)).

The Court has inherent power to sanction parties or their attorneys for improper conduct. Chambers v. Nasco, Inc. , 501 U.S. 32, 43-46 (1991); Roadway Express, Inc. v. Piper , 447 U.S. 752, 766 (1980); Fink v. Gomez , 239 F.3d 989, 991 (9th Cir. 2001). This includes the "inherent power to dismiss an action when a party has willfully deceived the court and engaged in conduct utterly inconsistent with the orderly administration of justice." Anheuser-Busch, Inc. V. Natural Beverage Distrib., 69 F.3d 337, 348 (9th Cir. 1995) (quoting Wyle v. R. J. Reynolds Indus., Inc. , 709 F.2d 585, 589 (9th Cir. 1983)). Because dismissal is such a harsh penalty, it should only be used in extreme circumstances. Wyle, 709 F.3d at 589.



A. Richard Sinclair's Motion to Amend the Scheduling Order

Richard Sinclair moves to have the Court reinstate his claims and amend the scheduling order to allow him to file a motion for summary judgment. Richard Sinclair argues that his claims were dismissed due to his failure to provide discovery and now that he has complied with the discovery orders he should be allowed the opportunity to litigate his claims. Initially, the Court notes that the cross complaint was not dismissed as a sanction for the failure to comply with the discovery orders, but for the Sinclair Defendants' failure to comply with the Court's orders regarding amending the complaint. Further, as discussed in detail below, the Sinclair Defendants have not complied with the Court orders regarding discovery in this instance.

Richard Sinclair seeks amendment of the scheduling order under Rule 15 of the Federal Rules of Civil Procedure which applies to amendment of the pleadings. Under Rule 15(a) of the Federal Rules of Civil Procedure, a party may amend the party's pleading once as a matter of course at any time before a responsive pleading is served. Otherwise, a party may amend only by leave of the court or by written consent of the adverse party, and leave shall be freely given when justice so requires. Fed.R.Civ.P. 15(a). Richard Sinclair argues that he should be granted leave to amend at least once as a matter of right.

"Rule 15(a) is very liberal and leave to amend shall be freely given when justice so requires.'" Amerisource Bergen Corp. v. Dialysis West, Inc. , 465 F.3d 946, 951 (9th Cir. 2006) (quoting Fed.R.Civ.P. 15(a)). However, courts "need not grant leave to amend where the amendment: (1) prejudices the opposing party; (2) is sought in bad faith; (3) produces an undue delay in the litigation; or (4) is futile." Amerisource Bergen Corp., 465 F.3d at 951. As the Sinclair Defendants' counterclaim has been dismissed with prejudice, any amendment would be futile.

At this stage of the litigation, the amendment of the scheduling order is governed by Rule 16 of the Federal Rules of Civil Procedure which requires the moving party to show good cause for the amendment. Johnson , 975 F.2d at 609. Richard Sinclair argues that good cause exists to amend the scheduling order because he has undergone three surgeries and was required to learn to walk again.

To the extent that Richard Sinclair seeks reconsideration of the order dismissing the Sinclair Defendants' claims with prejudice as a sanction for his failure to comply with court orders, "[m]otions for reconsideration serve a limited function: to correct manifest errors of law or fact or to present newly discovered evidence." Publishers Resource, Inc. v. Walker-Davis Publications, Inc. , 762 F.2d 557, 561 (7th Cir. 1985) (citation omitted). Reconsideration cannot be used to argue new facts or issues that were not presented to the court in the matter previously decided. Marlyn Nutraceuticals, Inc. , 571 F.3d at 880.

It is Richard Sinclair's contention that now that he has found the discovery which he was ordered to produce he has documents to support a motion for summary judgment. However, in this instance, the discovery of these documents does not change the fact that for years Richard Sinclair has continually disregarded court orders. Richard Sinclair's disregard for the court is further evidenced by his reply filed August 25, 2014 and his supplemental reply filed August 26, 2014. Local Rule 230(d) provides that "[n]ot less than seven (7) days preceding the date of hearing, the moving party may serve and file a reply to any opposition filed by a responding party."

Richard Sinclair filed his reply on August 25, 2014, two days prior to the scheduled hearing and his supplemental reply on August 26, 2014, the day prior to the hearing. Given that Richard Sinclair is facing a default sanction for failure to comply with Court orders, it is beyond comprehension why he would disregard the rules of this court in filing an untimely reply and supplemental reply. The Federal Rules of Civil Procedure, Local Rules, and Court's scheduling orders are not mere suggestions to be set aside or disregarded at the party's whim. Tapia v. Woods, No. 1:03-cv-05422-LJO-SMS PC, 2007 WL 3047106, at *1 (E.D. Cal. Oct. 17, 2007). Richard Sinclair did not seek leave to file his untimely reply and supplemental reply and, as noted at the September 27 hearing, they shall be disregarded.

In his motion to amend the scheduling order, Richard Sinclair sets forth his health issues as good cause to allow the amendment, but this issue was considered by Judge Ishii and found to not excuse Mr. Sinclair's continued failure to comply with the orders of the Court. Richard Sinclair was provided with an opportunity to address these issues prior to the sanction being imposed and improperly argues information that was available for consideration when the motion was originally decided.

Finally, despite Richard Sinclair's assertion that he was disabled, Plaintiffs have provided information to establish that Richard Sinclair was continuing to actively practice through February 2012. (See Decl. of Greg Durbin, ECF No. 1027; Request to Take Judicial Notice in Opposition to Motion to Reopen Discovery, ECF No. 954.) At the August 27 hearing, Richard Sinclair stated that he had not read the documents filed in opposition to his motion to reopen discovery until the night prior to the hearing, even though they were filed and he was served with a copy in July 2013. Richard Sinclair argued that since he did not review this information previously, it is a new fact which the Court should consider. Richard Sinclair argues that these documents misrepresent the amount of work that he was doing during the period of his disability. Unfortunately, the Court finds good reason to doubt Richard Sinclair's veracity. While Richard Sinclair states that he was disabled and unable to practice, at that same time he was able to conduct a five day jury trial, (ECF Nos. 533, 957-11 to 957-16), and looking at the other evidence provided by Plaintiffs it is clear that Richard Sinclair was actively practicing during this time period.

The Court finds further reason to question Richard Sinclair's veracity by review of the record in this action and his responses at the hearing. Prior to the hearing, the Court had extensively reviewed the record in these matters. It appears to this Court that Richard Sinclair's modus operandi is to disregard the orders of the Court and then later apologize claiming to have misunderstood or be unable to comply due to his alleged disability. While Richard Sinclair is quick to give this excuse when confronted by the Court, he never filed a motion seeking any relief from the Court due to his alleged disability.

Although Richard Sinclair complains that Plaintiffs to this action continued to file motions for sanctions while aware of his alleged disability, the Court has repeated found that the Sinclair Defendants were not compliant in their discovery responses. The fact that the Sinclair Defendants did not produce responsive documents in compliance with the previous orders is established by the fact that they have now produced over 300 documents. The Court cannot find fault with Plaintiffs' continued attempts to seek sanctions when it is evident that Sinclair Defendants were not complying with their discovery obligations and the orders of this court.

Richard Sinclair has failed to set forth grounds entitling him to reconsideration of the order dismissing his claims with prejudice as a sanction for disobeying court orders. Accordingly, good cause does not exist to amend the ...

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