EDMUND F. BRENNAN, Magistrate Judge.
This matter was before the court on March 11, 2015, for hearing on plaintiff Entrepreneur Media Inc.'s motion for an order to show cause in re contempt as to defendant Scott Smith. ECF No. 170.
Plaintiff Entrepreneur Media, Inc. ("EMI") filed this action to enforce a judgment entered in the United States District Court for the Central District of California against defendant Scott Smith in 2003 for trademark infringement.
Smith was first ordered to appear for a judgment debtor exam by an order entered on September 10, 2010. Yet, as detailed below, it took multiple filings, continuances, hearings, and admonishments for him to submit to such an examination, and his current failure to comply with the order to produce documents has prevented the completion of that examination. Smith has benefited from several extensions, has received multiple continuances, and has been warned as to the consequences of not complying with the court's orders.
Throughout these proceedings, EMI and Smith have filed numerous motions in which EMI has sought to obtain, and Smith has sought to prevent, access to evidence of and control over Smith's assets. EMI initially sought appointment of a receiver to sell certain domain names owned and/or controlled by Smith.
The court instructed the parties to complete the debtor exam (i.e., the deposition of Smith as to the existence and location of his assets) prior to addressing the various collection remedies requested by EMI. ECF Nos. 61, 64 at 6 (transcript of hearing noting concern that "no debtor's exam was ever done of Smith to explore other methods of execution of [ ] satisfaction of the judgment."); see also 106 at 3.
Smith responded to the order to appear at a debtor exam with a motion to stay this proceeding pending a bankruptcy appeal and with a motion for temporary restraining order. He argued that efforts to enforce the underlying judgment should be stayed pending his appeal before the U.S. Court of Appeals for the Ninth Circuit over the question of whether the judgment should have been discharged in bankruptcy. ECF Nos. 52, 53. Those motions were heard and denied on May 4, 2011, and the parties were ordered to proceed with the debtor exam set for May 18. ECF Nos. 61, 64 at 34.
Smith on that same day filed a motion to continue the debtor examination for a period of 60 days. He also requested that the deadline for producing documents be similarly extended. ECF No. 60. He argued that the extension was needed because the document requests required him to "pour through over seven (7) years of financial statements, bank records, and countless personal records. . . ." Id. at 3. He further stated that he was "trying to find legal representation to assist him in responding." Id. In light of that representation and the expectation that with assistance of counsel the new deadline would be met, he was granted an additional 60 days to produce the documents and the debtor examination was continued to July 20, 2011.
EMI had also served a third party subpoena on Bank of America seeking documents evidencing assets of Smith. Smith moved to quash that subpoena, ECF No. 65, and also filed a second motion to extend time to produce documents and to appear for the judgment debtor examination. ECF No. 67. He claimed that good cause supported his request for a variety of reasons, including: (1) the attorney he believed would be able to assist him at the judgment debtor examination "has contracted pneumonia and is apparently extremely ill" and that Smith was "unable to adequately determine when and if the attorney will still be able to assist [Smith] or if [Smith] will need to obtain alternative legal assistance, and [he] may not know for several weeks"; (2) "[a] significant number of [Smith's] documents and computer records may be unavailable until [he] can complete the time-consuming and expensive task of updating or trying to replace several computer applications that are incompatible with Apple's current operating system"; (3) Smith "recently received a Jury Summons to serve as a trial juror" and when he "called the Court to discuss possible scheduling conflicts, [he] was advised to appear at Sacramento Superior Court by 8:00 a.m. Monday, July 18, 2011 to Thursday, July 21, 2011, or until [he is] dismissed as a juror or [is] selected to serve as a trial juror"; and (4) allowing EMI to conduct the judgment debtor examination before the Court can rule on Smith's motion to quash and motion for sanctions could have the effect of mooting issues in that motion. Id. at 2-3.
Smith's articulated reasons were, for the most part, unpersuasive. However, in light of his representation of a sudden illness of his counsel, he was again permitted additional time. ECF No. 72. Smith was cautioned as to further delays and the debtor examination was reset for October 19, 2011. Smith was granted an additional 90 days to produce documents and was ordered to appear for the exam as rescheduled.
Prior to the rescheduled exam, EMI filed a motion for assignment of rights, a restraining order, and turnover order, and noticed that motion for hearing on October 26, 2011. ECF No. 79. EMI then requested that the debtor examination and the October 26, 2011 hearing be continued to October 19, 2011 (notwithstanding the court's direction that the examination be completed prior to consideration of the various collection remedies). ECF No. 83. The continuance was granted and the judgment debtor examination was reset for November 30, 2011 at 9:30 a.m. Consideration of the motion for assignment of rights, a restraining order, and turnover order was deferred until after the debtor exam.
Shortly after the court granted the requested continuance, EMI also filed a motion for a pre-filing screening order that would require all filings by Smith to be reviewed by the court before they were filed. ECF No. 87. Then, on November 29, 2011, Smith filed a motion for a continuance of his judgment debtor exam. ECF No. 92. That same day, EMI filed an application for an order to show cause why a permanent pre-filing order should not be issued as to Smith, and an opposition to Smith's request for an extension of time. ECF Nos. 93, 94. The court heard and denied those motions on November 30, 2011 and directed the judgment debtor exam to go forward that day as scheduled. ECF Nos. 96, 97.
After the November 30 debtor exam, EMI filed a notice on January 10, 2012, that the Ninth Circuit had affirmed a Bankruptcy Appellate Panel's judgment that Smith's debt to EMI was nondischargeable. ECF No. 107. Smith, as became his routine, responded by filing another request for a continuance, ECF No. 108; this time for a continuance of EMI's various motions for an assignment of rights and a turnover and restraining order, ECF No. 79. Smith claimed in the request that he found an attorney to represent him and needed time to prepare an opposition in light of the Ninth Circuit ruling. ECF No. 108. Based on that representation, the hearing for EMI's motions was continued to March 7, 2012. ECF No. 109. EMI's motions were heard and denied on March 7, during which the court expressed its concern that EMI was seeking an assignment of rights but had not adequately identified the specific source of money to be assigned, thereby preventing an application of the Cal. Civ. Proc. Code § 708.501 factors.
Thereafter, EMI filed (prematurely) another motion to appoint a receiver of Smith's domain names, ECF No. 115, and also sought an order for Smith's appearance at a further judgment debtor exam. ECF No. 117. Smith was ordered to appear on October 17, 2012, for that examination. ECF No. 121. But Smith sought numerous continuances. On September 26, 2012, he requested a 90 day continuance. ECF No. 122. This time he represented to the court that "[t]he attorney Smith reasonably believed would be assisting him to properly research and oppose EMI's Motion for Appointment of Receiver, very recently informed Smith that she will NOT be able to due to several recent and significant changes in her personal and professional life." Id. at 2. Smith added that he was able to find a new attorney "who has agreed to come on board" and identified the attorney as Eric Mewes. However, Smith also added that Mr. Mewes "recently had major surgery and is on doctor's orders to `lay low' for several months." Id. In light of those representations, the examination was continued to January 16, 2013. ECF No. 124. But on January 2 Smith sought a second continuance claiming attorney Mewes needed additional time to prepare because he was recovering from surgery. ECF 125. Smith was granted another continuance and the judgement debtor examination and the hearing on EMI's motion for appointment of a receiver were continued to April 17, 2013.
Not surprisingly, on March 27, 2013, Smith filed yet another motion for a 90-day continuance. ECF No. 128. This time Smith claimed that the extension was necessary because he "has been diagnosed with a serious and painful medical condition that is physically preventing him from being able to properly prepare for or attend [the judgment debtor examination], and from being able to properly maintain a continuous and close working relationship with his attorney, Eric Mewes." Id. at 2. Smith stated that Mewes "has been diligently working on Smith's case, but because he is new on this complicated case that involves numerous issues and has roots dating back over 15 years, Mewes must frequently rely on Smith to be able to quickly provide information and documents that only Smith can provide." Id. at 4. Smith said "due to [his] current medical condition, he has been unable to timely provide Mewes with the information and documents that Mewes needs to properly represent Smith in this proceeding." Id. at 4-5. Contrary to those representations, however, Mr. Mewes filed shortly thereafter (on April 2, 2013) a notice of Substitution of Attorney, ECF No. 129, and an opposition to the motion to appoint a receiver for Smith's domain names, ECF No. 130. Accordingly, the request for continuance was denied as moot. ECF No. 133 at 3. The order expressly stated that the April 17, 2013 judgment debtor examination remains on calendar. Id.
On April 17, 2013, Smith failed to appear for the examination. He had been ordered to appear on that date at 9:30 a.m. His counsel, Mr. Mewes, and counsel for EMI, Mr. Cook, were present and waited. The court held a hearing at 10:15 a.m. regarding Smith's absence. Mewes informed the court that he had spoken with Smith by phone at 9:57 a.m. Smith reported in that call that he was having problems with kidney stones but was on his way and would be arriving for the examination by 11:00 a.m.
Smith did not arrive at 11:00 a.m. and as of 11:20 a.m. was still not present. The case was recalled at that time. Smith still was not present. After discussion, counsel were released and, Smith was ordered to show cause why he should not be sanctioned for his failure to appear for his examination, including paying the cost of the reporter and EMI's attorney's fees. ECF Nos. 135, 138 at 7-10. Smith's judgment debtor examination was reset for June 5, 2013, at 9:30 a.m. Id. at 3.
Smith and his counsel each responded to the order to show cause, arguing that sanctions were inappropriate because: (1) this court has no jurisdiction to rule on post-trial supplemental/ancillary matters such as the imposition of sanctions in the instance case, absent express written consent of all parties (arguing that Eastern District of California Local Rules 302(c)(11) and (21) are invalid); (2) the court should not have denied Smith's earlier (and third) request for a continuance of the judgment debtor examination; and (3) Smith did not fail to appear on April 17, and he should not be sanctioned for his late appearance that day due to his serious medical condition. ECF Nos. 137, 137-1.
Smith, consistent with his established pattern, requested a 45-day continuance of the June 5 date for hearing on the order to show cause and for the debtor examination, claiming a continuance was necessary because he was scheduled to have major back surgery the week of June 3, 2013. ECF No. 140; see also ECF No. 141. In light of the allegation of scheduled surgery, the show cause hearing and the judgment debtor examination were moved to July 24, 2013. ECF No. 144.
Smith appeared on that date with his counsel and was admonished about the repeated delays and his failure to appear on April 17, 2013. ECF No. 146 at 3-4. Unchastened, Smith, through his counsel, again asked that the debtor exam be continued. Id. at 14. That request was denied and the parties were ordered to proceed with the deposition. Id. at 15. Although the deposition proceeded, the court's intervention became necessary due to Smith's objections to questions about whether he had any ownership interest in any websites and how and from what sources/accounts he paid his attorney's fees and the amount paid. Id. at 20, 36. Smith was directed to respond to the questions regarding his ownership interest in any website, and then, if necessary, provide whatever explanation was necessary to explain his understanding of the interest. Id. at 32. Smith's attorney-client privilege objection as to questions regarding payment of attorney's fees was set for briefing.
At EMI's request, that date was continued to October 2, 2013 at 10:00 a.m. ECF Nos. 149, 151. In the interim, EMI also filed a motion to compel further production of documents and the court set all matters, including the remainder of Smith's debtor exam, to be heard jointly on October 16, 2013. ECF No. 161. At the October 16 hearing, Smith's counsel confirmed that Smith would respond to the questions, ECF No. 164 at 3, and Smith was ordered to answer questions as to the source of payment of attorney's fees and whether his attorney was holding any funds for Smith, ECF No. 164 at 5-6. However, Smith did not bring to the courtroom the documents sought by EMI's request for production. Therefore, questioning of Smith as to those documents had to be deferred to a future date to be set in the court's written ruling on the motion to compel. ECF No. 164 at 9.
The court entered its order on November 26, 2013, granting in part the motion to compel and ordering Smith to produce documents responsive to requests number 2 through 13.
Smith sought reconsideration of the November 26 order by the assigned district judge, arguing that the court failed to consider whether EMI complied with Local Rule 251(b)'s meet and confer requirement prior to filing its motion to compel discovery. ECF No. 163. Judge Mendez denied that motion on January 13, 2014. ECF No. 165. Smith thereafter filed a notice of appeal citing both the November 26 order as well as the order denying his motion for reconsideration. ECF No. 166. That appeal was dismissed by the Ninth Circuit for lack of jurisdiction.
On December 3, 2014, EMI sought an order to show cause in re contempt due to Smith's failure to comply with the November 26, 2014 order to produce the documents. ECF Nos. 170, 172. Smith filed his opposition to that request, ECF No. 175, and on February 4, filed a request for a 45-day continuance of the hearing on the matter explaining that Mr. Mewes's (Smith's attorney) father had recently died and Mr. Mewes needed an extension to handle matters regarding his father's estate. ECF No. 177. The hearing was continued to March 11, 2015. ECF No. 178. However, a few days before the hearing, on March 9, Smith personally filed a request to again continue the hearing for at least 60 days. ECF No. 180. He stated that the additional continuance was needed because Mr. Mewes had suffered an unspecified "life threatening medical emergency that could require weeks or months of treatment and recovery." Id. at 4. The request was not supported by any documentation of Mr. Mewes's condition and how it would preclude his attendance at the March 11 hearing. Given the history of delays occasioned by Smith, the unsupported request was denied. ECF No. 181.
Despite Smith's representations of a "life threatening medical emergency," Mr. Mewes appeared at the March 11, 2015 hearing.
Setting to the side for the moment the history of noncompliance and obstruction of discovery in this judgment enforcement proceeding, the instant motion focuses on Smith's disobedience of the court's November 26, 2013 order to produce documents. That order specifically directed Smith to produce, within 21 days, documents responsive to EMI's request numbers 2 through 13. ECF No. 162 at 7. Smith has failed to provide any valid basis for disregarding the court's November 26, 2013 order, and, as explained below, he should now be ordered to show cause before the district judge why he should not be incarcerated for civil contempt until he complies with the court's order.
Where, as here, a party fails to obey a court order compelling discovery, the court may issue sanctions, including "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)(1)(vii). Civil contempt "consists of a party's disobedience to a specific and definite court order by failure to take all reasonable steps within the party's power to comply." Reno Air Racing Ass'n, Inc. v. McCord, 452 F.3d 1126, 1130 (9th Cir. 2006). A sanction for civil contempt is intended to coerce the party in contempt to comply with the court's order in the future, with the sanction conditioned on continued noncompliance. Richmark Corp. v. Timber Falling Consultants, 959 F.2d 1468, 1481 (9th Cir. 1992). Thus, a party imprisoned for contempt "carries the keys of his prison in his own pocket because civil contempt is intended to be remedial by coercing the defendant to do what he had refused to do." Lasar v. Ford Motor Co., 399 F.3d 1101, 1110 (9th Cir. 2005).
"The moving party has the burden of showing by clear and convincing evidence that the contemnors violated a specific and definite order of the court." Federal Trade Comm'n v. Affordable Media, 179 F.3d 1228, 1239 (9th Cir. 1999). To establish that civil contempt is appropriate, EMI must demonstrate "(1) that [Smith] violated the court order, (2) beyond substantial compliance, (3) not based on a good faith and reasonable interpretation of the order, (4) by clear and convincing evidence." United States v. Bright, 596 F.3d 683, 694 (9th Cir. 2010). Once EMI makes this showing, the burden shifts to Smith to demonstrate that he "took all reasonable steps within his power to insure compliance with" the court's order. Hook v. Arizona Dept. of Corrections, 107 F.3d 1397, 1403 (9th Cir. 1997).
"The choice among the various sanctions rests within the discretion of the district court," United States v. Sumitomo Marine & Fire Ins. Co., 617 F.2d 1364, 1369 (9th Cir. 1980), and the Ninth Circuit "defer[s] considerably to the judgment of the district court in fashioning the appropriate sentence because of its proximity to the events out of which contempt springs." United States v. Flores, 628 F.2d 521, 527 (9th Cir. 1980). However, a "district court should apply the least coercive sanction (e.g., a monetary penalty) reasonably calculated to win compliance with its orders." Id.
As recounted above, Smith has disobeyed a discovery order entered by a magistrate judge. Pursuant to 28 U.S.C. § 636(e)(6)(B)(iii), where a party's conduct "constitutes a civil contempt, the magistrate judge shall forthwith certify the facts to a district judge and may serve or cause to be served, upon any person whose behavior is brought into question under this paragraph, an order requiring such person to appear before a district judge upon a day certain to show cause why that person should not be adjudged in contempt by reason of the facts so certified." At the hearing, "[t]he district judge shall thereupon hear the evidence as to the act or conduct complained of and, if it is such as to warrant punishment, punish such person in the same manner and to the same extent as for a contempt committed before the district judge."
The court finds that Smith has willfully disobeyed the court's order that he produce documents delineated in the court's order docketed on November 26, 2013, ECF No. 162 at 3-4 and 7 (ordering production of documents response to requests "2 through 13."). Thus, Smith was ordered to produce:
ECF No. 162 at 3-4.
The order sufficiently describes the document to be produced. It clearly ordered Smith to do so by a fixed deadline, i.e. within 21 days of the date of the order. Id. at 7. At the March 11 hearing on this motion, Smith's counsel conceded that his client had not yet produced any responsive documents. Indeed, he stated that his client was in the process of gathering the documents, although no justification was given for why he had not done so prior to the date that they were due; this despite the fact that the discovery order was issued approximately 16 months prior to the hearing. Counsel also claimed that he brought to the hearing documents that were responsive to some of the discovery requests. Those documents, which were subsequently filed with the court, consist of little more than a few carbon copies of deposit slips, a letter from Bank of America to EMI's counsel, and a list of domain names purportedly owned by Smith. ECF No. 183. They fall far short of the financial documents Smith was ordered to produce. See ECF No. 162. Counsel, acknowledging the deficiency of the documents brought to the hearing, further represented that Smith could fully comply with the court's November 26 order if given as little as 10 extra days. Far more than 10 days have now passed. To no surprise, there has been no indication that Smith has complied with the court's order.
Further, the court finds that a lesser sanction than resort to the court's powers of civil contempt would have no impact on Smith's recalcitrance. As recounted above, this judgment enforcement proceeding was initiated in this district to enforce a 2003 judgment rendered against Smith. Smith's conduct throughout has been a pattern of stall tactics and evasive behavior. Over the course of approximately five years, he has sought a continuance of virtually every matter before this court in his attempt to evade discovery of his assets and delay or avoidance entirely of payment of the judgment. Notwithstanding his having received the benefit of the doubt on many of the continuances, Smith persist in trying the court's patience with more delays and then ignoring repeated admonishments as to noncompliance. In light of his conduct, there is no reason to believe that monetary sanctions will coerce compliance. Simply adding additional dollars to the judgment (exceeding $682,156) that he continues to avoid creates no incentive to comply with the order that he provide documents which will disclose his assets.
Accordingly, EMI's motion for an order to show cause should be granted and Smith should be directed to be appear before the Judge Mendez to show cause why he should not be incarcerated for civil contempt until he complies with the court's order.
For the reasons stated above, it is recommended that defendant Scott Smith be ordered to appear before Judge Mendez, at a date and time to be set by Judge Mendez, to show cause why Smith should not be found in civil contempt and incarcerated until he fully complies with the court's November 26, 2013 order.
These findings and recommendations are submitted to the United States District Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1). Within fourteen days after being served with these findings and recommendations, any party may file written objections with the court and serve a copy on all parties. Such a document should be captioned "Objections to Magistrate Judge's Findings and Recommendations." Failure to file objections within the specified time may waive the right to appeal the District Court's order. Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).
