Rule 37(b) Default Upheld for Disregard of Oral Discovery Order Not Noticed, Opposed or Formally Heard — Five-Factor Ninth Circuit Test for Default Sanction — Second Judge on Case May Reconsider Orders of First — 16(f) Sanctions — Good Quotes

From Dreith v. Nu Image, Inc., 2011 U.S. App. LEXIS 14686 (9th Cir. July 19, 2011):

The Defendants below, Appellants here, engaged in discovery misconduct that was sufficiently egregious to cause the district court to enter an order of default against them. ***

The district court possessed the power to impose default as a sanction for the Companies' discovery misconduct. Under Federal Rule of Civil Procedure 37(b), a district court may impose sanctions, including default, for failing to comply with a court order. Rule 37(b) reads in relevant part as follows:

If a party . . . fails to obey an order to provide or permit discovery, including an order under Rule 26(f), 35, or 37(a), the court where the action is pending may issue further just orders. They may include . . . dismissing the action or proceeding in whole or in part; [and] rendering a default judgment against the disobedient party.

Fed. R. Civ. P. 37(b)(2)(A)(v)-(vi).

The Companies put forth two arguments regarding the district court's alleged lack of power to impose the sanction of default: (1) the default did not result from any noticed motion by the Fund, and (2) the court's discovery order of April 18 was invalid, and thus could not serve as a basis for sanctions, because it was issued prior to a noticed motion to compel.

The Companies' first argument fails. Though Judge Real was decisive in the manner in which he imposed sanctions, the plain language of Rule 37(b) contains no requirement mandating a noticed motion or opportunity to be heard before sanctions — including default — may be imposed. ***

The Companies' second argument is equally unavailing. The Companies go to great lengths to argue that the April 18 order was invalid and thus could not serve as a basis for Rule 37(b) sanctions because it was issued before the Fund's motion to compel was heard. Rule 37(b) sanctions, however, may be issued if a party "fails to obey an order to provide or permit discovery, including an order under Rule 26(f), 35, or 37(a)." "The definition of 'order' in Rule 37(b) has been read broadly." Unigard Sec. Ins. Co. v. Lakewood Eng'g & Mfg. Corp., 982 F.2d 363, 368 (9th Cir. 1992). Sanctions may be imposed even for violation of a court's oral order, as long as a party has "unequivocal notice that a court has asked that certain documents be produced." Id. (citing Henry v. Sneiders, 490 F.2d 315, 318 (9th Cir. 1974)). Though the April 18 order was not noticed, opposed, and heard in a formal manner, it still constituted "an order to provide or permit discovery" with which compliance was mandatory, in the same way an oral order of a district court, though perhaps imposed quickly at the conclusion of a hearing, is nonetheless binding on the parties. As Rule 37(b) states, an order stemming from a noticed motion to compel is but one example of an order which may, upon violation thereof, result in sanctions.

Furthermore, "Rule 16 of the Federal Rules of Civil Procedure authorizes a district court to enter a scheduling order that limits joinder of parties and amendment of the pleadings. Fed. R. Civ. P. 16(b)(1). Violations of a scheduling order may result in sanctions, including dismissal under Rule 37(b)(2)(C)." Atchison, Topeka and Santa Fe Ry. Co. v. Hercules Inc., 146 F.3d 1071, 1073 (9th Cir. 1998) (citing Fed. R. Civ. P. 16(f)). See also In re Phenylpropanolamine (PPA) Products Liab. Litig., 460 F.3d 1217, 1227 (9th Cir. 2006) ("The goal [of Rule 16] is to get cases decided on the merits. . . . Subsection (f) puts teeth into these objectives by permitting the judge to make such orders as are just for a party's failure to obey a scheduling or pretrial order, including dismissal.").

Judge Real stated that the imposed sanction was precipitated not only by the Companies' violation of the April 18 order, but also by their failure to adhere to scheduled dates for initial disclosures***. The Companies also declined to meet and confer or prepare a joint stipulation, as the pretrial order required them to do. The pretrial order in this case undisputedly warned that failure to comply could result in sanctions including dismissal and entry of judgment. These failures to comply with orders of the court provided Judge Real with the power under Rule 37(b) to impose sanctions sua sponte, up to and including default.

Moreover, a district court has the inherent power to revisit its non-final orders, and that power is not lost when the case is assigned mid-stream to a second judge. Orders such as the default in this case are "subject to reconsideration and revision either by the same judge, a successor judge or a different judge to whom the case might be assigned." United States v. Desert Gold Mining Co., 433 F.2d 713, 715 (9th Cir. 1970). As the Companies state in their opening brief, almost half of Judge Wilson's twenty-five page opinion "was spent revisiting Judge Real's entry of the Companies' default." Judge Wilson stepped into Judge Real's shoes, and what he then did was manifestly appropriate in revisiting previous orders of the court. Effectively, Judge Wilson considered the matter as though he had been presented with a motion pursuant to Rule 55(c) to set aside the default. ***

Nor did Judge Wilson abuse his discretion by imposing the sanction of default. Although dismissal is a harsh penalty imposed only in extreme circumstances, Ferdik v. Bonzelet, 963 F.2d 1258, 1260 (9th Cir. 1992), we will overturn a dismissal sanction only if we have a "definite and firm conviction that it was clearly outside the acceptable range of sanctions," Malone, 833 F.2d at 130.

We have identified five factors that a district court must consider before dismissing a case or declaring a default: "(1) the public's interest in expeditious resolution of litigation; (2) the court's need to manage its docket; (3) the risk of prejudice to the other party; (4) the public policy favoring the disposition of cases on their merits; and (5) the availability of less drastic sanctions."

Adriana Int'l Corp. v. Thoeren, 913 F.2d 1406, 1412 (9th Cir. 1990) (quoting Malone, 833 F.2d at 130). If the district court fails to make explicit findings regarding each of these factors, we must review the record independently to determine whether the dismissal was an abuse of discretion. Malone, 833 F.2d at 130. "We may affirm a dismissal where at least four factors support dismissal, or where at least three factors strongly support dismissal." Yourish v. Cal. Amplifier, 191 F.3d 983, 990 (9th Cir. 1999) (internal quotation and ellipsis omitted). In addition, in order to warrant a sanction of dismissal, the party's violations of the court's orders must be due to wilfulness or bad faith. Wyle v. R.J. Reynolds Indus., Inc., 709 F.2d 585, 589 (9th Cir. 1983).***

The Federal Rules of Civil Procedure exist to move a case forward to disposition, and to do so promptly and expeditiously. As Judge Wilson correctly noted, discovery too often has become a desultory game of hide and seek.

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