Discovery Sanctions — Default Judgment — Standards — Fugitive Disentitlement Doctrine vs. Rule 37
SEC v. Razmilovic, 2013 U.S. App. LEXIS 14765 (2d Cir. July 22, 2013):
A. The Entry of Default
Rule 37 of the Federal Rules of Civil Procedure provides in part that if a party "fails to obey an order to provide . . . discovery, . . . the court where the action is pending may issue further just orders," including
(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 . . . .
Fed. R. Civ. P. 37(b)(2)(A). Clearly, the most severe of these sanctions for a disobedient plaintiff is the dismissal of his action; the most severe for a disobedient defendant is the imposition of a default. "[D]ismissal or default" should be ordered "only when the district judge has considered lesser alternatives." Southern New England Telephone Co. v. Global NAPs Inc., 624 F.3d 123, 144 (2d Cir. 2010) ("SNET"). No sanction should be imposed without giving the disobedient party notice of the particular sanction sought and an opportunity to be heard in opposition to its imposition. See, e.g., Reilly v. NatWest Markets Group Inc., 181 F.3d 253, 270 (2d Cir. 1999), cert. denied, 528 U.S. 1119 (2000); United States Freight Co. v. Penn Central Transportation Co., 716 F.2d 954, 955 (2d Cir. 1983) ("U.S. Freight").
We review a district court's imposition of sanctions for abuse of discretion. See, e.g., National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 642 (1976) ("NHL"); Agiwal v. Mid Island Mortgage Corp., 555 F.3d 298, 302 (2d Cir. 2009) ("Agiwal"); U.S. Freight, 716 F.2d at 955; Sieck v. Russo, 869 F.2d 131, 134 (2d Cir. 1989) ("Sieck").
"[S]everal factors may be useful in evaluating a district court's exercise of discretion" to impose sanctions pursuant to this rule, including "(1) the willfulness of the non-compliant party or the reason for noncompliance; (2) the efficacy of lesser sanctions; (3) the duration of the period of noncompliance, and (4) whether the non-compliant party had been warned of the consequences of noncompliance."
SNET, 624 F.3d at 144 (quoting Agiwal, 555 F.3d at 302).
Because the text of the rule requires only that the district court's orders be "just," however, and because the district court has "wide discretion in imposing sanctions under Rule 37," Shcherbakovskiy v. Da Capo Al Fine, Ltd., 490 F.3d 130, 135 (2d Cir.2007) (internal quotation marks omitted), these factors are not exclusive, and they need not each be resolved against the party challenging the district court's sanctions for us to conclude that those sanctions were within the court's discretion.
SNET, 624 F.3d at 144. In Sieck, we affirmed the entry of defaults against defendants who "elected to defy" two court orders to attend their depositions. 869 F.2d at 134. We noted that
[t]he mere availability of softer sanctions . . . does not bar a court from imposing the default sanction. As the Supreme Court recognized,
here, as in other areas of the law, the most severe in the spectrum of sanctions provided by statute or rule must be available to the district court in appropriate cases, not merely to penalize those whose conduct may be deemed to warrant such a sanction, but to deter those who might be tempted to such conduct in the absence of such a deterrent.
Sieck, 869 F.2d at 134 (quoting NHL, 427 U.S. at 643); see also NHL 427 U.S. at 640, 642 (extreme sanction of dismissal of complaint justified where failure to comply with court's order was due to plaintiffs' willfulness and bad faith); Agiwal, 555 F.3d at 302 ("dismissal with prejudice is a harsh remedy to be used only in extreme situations, and then only when a court finds willfulness, bad faith, or . . . fault by the non-compliant litigant" (internal quotation marks omitted)); id. ("[w]hether a litigant was at fault or acted willfully or in bad faith are questions of fact").
An abuse of discretion may consist of an erroneous view of the law, a clearly erroneous assessment of the facts, or a decision that cannot be located within the range of permissible decisions. See, e.g., Agiwal, 555 F.3d at 302 n.2; Sims v. Blot, 534 F.3d 117, 132 (2d Cir. 2008). "A district court would necessarily abuse its discretion if it based its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence." Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990) (reviewing sanction imposed pursuant to Fed. R. Civ. P. 11). But in the absence of such an error, "[t]he question, of course, is not whether [the reviewing court] would as an original matter have [imposed the sanction in question]; it is whether the District Court abused its discretion in so doing." NHL, 427 U.S. at 642; see, e.g., SNET, 624 F.3d at 143.
In the present case, we see no error of law nor any clearly erroneous finding of fact with respect to the district court's decision to impose on Razmilovic the sanction of default. To begin with, we reject Razmilovic's contention that the district court violated the principle established by Degen, i.e., that the fugitive disentitlement doctrine should not be applied to prevent a fugitive from a criminal case from participating in a civil case.
The fugitive disentitlement doctrine allows an appellate court to, inter alia, "dismiss the appeal of a defendant who is a fugitive from justice during the pendency of his appeal."
Ortega-Rodriguez v. United States, 507 U.S. 234, 239 (1993). The Degen Court held that this doctrine does not authorize the district court to "strike the filings of a claimant in a forfeiture suit" and enter judgment against him merely "for failing to appear in a related criminal prosecution," 517 U.S. at 821, "or otherwise . . . resisting[ the] related criminal prosecution," id. at 823.
In the present case, however, as described in Part I.A. above, the court rejected Razmilovic's Degen argument because the SEC did not seek--and the court did not enter--sanctions under the fugitive disentitlement doctrine (see Conf. Tr. 3). Rather, the court entered the default against Razmilovic on the express basis that he had willfully disobeyed the October 2009 Order. (See id. at 3, 4-5.)
Further, that basis for imposition of a default was plainly one as to which the Degen Court had indicated approval. That Court stated that a "District Court has its usual authority to manage discovery in a civil suit, including the power to enter protective orders limiting discovery as the interests of justice require." 517 U.S. at 826. The Degen Court added:
[O]f course, [the fugitive's] absence entitles him to no advantage. If his unwillingness to appear in person results in noncompliance with a legitimate order of the court respecting pleading, discovery, the presentation of evidence, or other matters, he will be exposed to the same sanctions as any other uncooperative party. A federal court has at its disposal an array of means to enforce its orders, including dismissal in an appropriate case. Again, its powers include those furnished by federal rule, see, e.g., Fed. Rules Civ. Proc. 37, 41(b); National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639 (1976) (per curiam) . . . .
Degen, 517 U.S. at 827 (emphases added). The entry of a default in the present case pursuant to Rule 37(b)(2)(A)(vi) because of Razmilovic's refusal to comply with the district court's legitimate discovery order plainly did not run afoul of Degen.
Razmilovic does not even attempt to argue that the court's finding of willfulness was erroneous. Nor, plausibly, could he. His adamant and express insistence that he would not comply with the October 2009 Order requiring that he appear for his deposition in New York made plain that his disobedience was willful and intentional.
None of Razmilovic's proposed alternative sanctions was likely to lead to his compliance with the court's order for his deposition as noticed by the SEC or to provide the SEC with the discovery methods to which it was entitled. As indicated in Part I.A. above, the court had warned that if Razmilovic did not appear for his deposition in accordance with the SEC's notice he would be exposed to "sanctions . . . pursuant to Rule 37(b)(2)(A), including a default judgment being entered against him," October 2009 Order at 1. Although Razmilovic disobeyed only that single court order, his adamance in the face of the court's warning of possible sanctions that included the extreme sanction of default clearly supported an inference that renewed orders to appear would be unavailing and that no lesser sanction would be effective to induce Razmilovic to appear in New York for his deposition. The court was not required to relieve him of that obligation. Given that "the most severe in the spectrum of sanctions provided by" Rule 37 "must be available to the district court in appropriate cases," not only to make such discovery orders effective in the case at hand but also "to deter those who might be tempted to [engage in similar disobedience] in the absence of such a deterrent," NHL, 427 U.S. at 643, we cannot conclude that the entry of default against Razmilovic in the present case was an abuse of discretion.
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