SUZANNE H. BAUKNIGHT, Bankruptcy Judge.
Before the Court is the Motion to Withdraw or Amend Request for Admissions Deemed Admitted Pursuant to Rule 36(b) ("Motion to Withdraw") filed by Defendants on January 14, 2020 [Doc. 26],
Defendants seek to withdraw or amend the deemed admissions pursuant to Federal Rules of Civil Procedure Rule 36, which governs requests for admission and provides in material part:
. . . .
Fed. R. Civ. P. 36 (applicable to adversary proceedings under Fed. R. Bankr. P. 7036).
Defendants offer no explanation in their Motion to Withdraw and supporting brief for their failure to (1) initially respond to the Requests for Admissions, (2) respond to the Motion to Deem Admissions Admitted, or (3) take action concerning the Requests for Admissions during the nearly fifty days after entry of the Order Deeming Admissions Admitted. Moreover, as of the date of Plaintiff's response to the Motion to Withdraw (January 24, 2020), Defendants still had not provided responses to the Requests for Admissions (or any of Plaintiff's written discovery requests). [Doc. 35 at p. 11.]
Instead, Defendants merely recite Rule 36(b) and rely on the Sixth Circuit's test in Kerry Steel, Inc. v. Paragon Industries, Inc., 106 F.3d 147, 154 (6th Cir. 1997),
Defendants focus on the second prong of the test — prejudice to the opposing party — and cite to several cases. [Doc. 27 at p. 3.] A review of the facts of those cases is instructive. Defendants first cite to In re Clapper [id.], but without sufficient citation to allow the Court to locate any opinion.
Id. The appellate court recited no facts concerning the government's delay, and the district court decision is not available.
Defendants next cite to Szatanek v. McDonnell Douglas Corp., 109 F.R.D. 37, 39-40 (W.D.N.Y. 1985). [Doc. 27 at p. 3.] The defendant in Szatanek missed the initial deadline for responding to the plaintiff's discovery requests, including requests for admissions, and repeatedly missed extended deadlines so that after waiting from late July to early December, the plaintiff filed a motion asking the trial court to strike the defendant's answer, deem admitted all facts in the unanswered requests to admit, and grant summary judgment in favor of the plaintiff. The court described the facts as follows:
Id. at 40. The court also noted the extensive history of discovery that had been answered by the defendant over the course of the two years during which the case had been pending before the discovery requests at issue were served by the plaintiff. See id. at 40-41. "Thus," the court concluded, "it cannot be said whether the plaintiff or the defendant has been the more dilatory in proceeding with this case prior to the instant dispute." Id. at 41. And, although the discovery termination deadline of mid-December had been established, no trial date had been set. Id. Ultimately, the court denied the plaintiff's sanctions request, saying, "In striking a balance between the diligence in litigation and the interests of justice, it is evident that the interests of justice will not be furthered in determining all the issues as to liability in this lawsuit on the basis of various missed deadlines and defendant's counsel's negligence." Id.
Defendants here next cite to NCR Corp. v. J-Cos Systems Corp., Civ. A. No. 87-1520, 1987 WL 13683, at *1 (E.D. Pa. July 13, 1987) [Doc. 27 at p. 3], in which the plaintiff moved for summary judgment on the basis of unanswered requests for admissions. Thirteen days after the due date for response, the defendant answered with denials, leading the defendant to ask that its tardiness be excused. Id. Although noting that the defendant did not explain the reason for the delay or its failure to request additional time to respond, without citation to Rule 36, the court found that "justice would not be served by awarding summary judgment to plaintiff. The delay did not prejudice plaintiff's case, nor did it cause a significant loss of time in the course of this litigation." Id.
After citation to these several cases, Defendants argue that they stand by their denial of the allegations of fraud in their answer to the complaint and that a claim of "fraud under [11 U.S.C.] § 523(a) may not be summarily disposed of by Requests for Admission" because the "determination of the dischargeability of a debt presents mixed questions of law and fact." [Doc. 27 at p. 3.] Defendants then conclude:
[Id. at p. 4.]
In response, Plaintiff notes that Defendants have utterly failed to provide any discovery responses and they have not indicated which of the eighteen Requests for Admissions they now propose to deny. [Doc. 35 at p. 6.] Plaintiff also points out that Defendants have failed to show how any deemed admission is contradicted by any discovery response or pleading: "It has fallen to the Plaintiff, who does not bear the burden on this issue, and to the Court, to look at the requests for admissions to determine whether any Defendants' defense can survive the admissions." [Id. at p. 7.] Indeed, Plaintiff argues, Defendants' Answer "does not directly contradict many of the admissions nor does it provide a factual basis for finding a meritorious defense to be served by withdrawal of the admissions and trial." [Id.]
More importantly, Plaintiff argues, prejudice would result from the Court's granting the Motion to Withdraw. [Id. at pp. 8-10.] Plaintiff asserts that it has diligently pursued its claim and, based on Defendant's wholesale failure to respond or engage in discovery and the Court's granting of Plaintiff's Motion to Deem Admissions Admitted (which motion was not required to be filed by Rule 36), Plaintiff ceased further attempts at discovery and prepared and filed the motion for summary judgment. [Id. at pp. 8-9.] Plaintiff notes that Defendants have not even served their initial disclosures, which were due on September 14. [Id. at p. 9; Doc. 12 at ¶ 2.] Finally, Plaintiff is correct that the deadline for completion of discovery has now passed, having expired on February 4, 2020 (one day after Plaintiff's response was due to the Motion to Withdraw). [Docs. 15 at ¶ 4.A, 35 at ¶ 7; see Doc. 26.]
The two-pronged test for withdrawal or amendment of admissions under Rule 36(b) that is universally followed requires the following analysis:
Clark v. Johnston, 413 F. App'x 804, 818 (6th Cir. 2011) (quoting Kerry Steel, 106 F.3d at 154). "Under the second prong, the non-movant bears the burden of proof." Smith Rd. Furniture, Inc. v. Able Comput. Sys. of Ohio, Inc. (In re Smith Rd. Furniture, Inc.), 304 B.R. 790, 792 (Bankr. S.D. Ohio 2003) (citation omitted).
The Sixth Circuit in United States v. Petroff-Kline, 557 F.3d 285, 293 (6th Cir. 2009), explained that Rule 36 "is essentially intended to facilitate proof at trials by obviating the need to adduce testimony or documents as to matters that are really not in controversy." Courts, however, have "considerable discretion" when determining whether to allow a party to withdraw or amend under Rule 36(b).
In Wylie v. Transunion, LLC, No. 3:16-cv-102, 2017 WL 4357981, at *8 (W.D. Pa. Sept. 29, 2017), the court denied the plaintiff's request to withdraw deemed admissions. The plaintiff failed to respond to the requests for admissions and six months after the response deadline passed, asked the court to set aside the deemed admissions under Rule 36(b). Id. at *1. The defendant filed a motion to dismiss, and at the time of the motion to withdraw the admissions, the defendant had not yet filed an answer to the complaint. Id. Although the court found that the plaintiff had met the first prong of the analysis, see id. at *3, the court agreed with the defendant that the plaintiff had "unilaterally refused to participate in discovery for over five months without ever asking . . . for an extension of time to respond or filing a motion for a stay with the Court." Id. at *2. The court also agreed with the defendant's argument that it would be prejudiced if the plaintiff were allowed to withdraw the admissions because discovery had been closed and the defendant had "reasonably relied on [the plaintiff]'s admissions in its subsequent decision not to conduct certain discovery." Id. The court concluded that "if [the] Rule 36(b) Motion were granted, the case would need to, in essence, return to the beginning of discovery because [the plaintiff] entirely refused to respond to [the defendant's] discovery requests or to issue his own discovery requests." Id. at *4. Also, the defendant had filed its motion for summary judgment twenty-one days before the plaintiff filed his Rule 36(b) motion, which meant that if the court granted the plaintiff's Rule 36(b) motion, the defendant would "need to substantially amend or supplement its Motion for Summary Judgment and accompanying briefs to eliminate its reliance on [the plaintiff's] admissions and to incorporate information gathered during the second round of discovery." Id.
The Wylie court concluded:
Id.
Similarly, in Spirit SPE Portfolio 2007-1LLC v. Paxos (In re Paxos), Bankr. No. 12-61280, Adv. No. 12-6112, 2014 WL 1089812, at *3 (Bankr. N.D. Ohio Mar. 19, 2014), the bankruptcy judge acknowledged the Sixth Circuit jurisprudence concerning withdrawal of admissions under Rule 36(b) but distinguished those cases because in Petroff-Kline and Chancellor v. City of Detroit, 454 F.Supp.2d 645 (E.D. Mich. 2006), late-filed responses that were accepted and treated as an effective withdrawal of admissions (even without a motion to withdraw) were only three days late. In Paxos, the plaintiff's responses were three months late under the original Rule 36 deadline and four days late under a second-chance deadline established by the court and had been provided only after the defendant had filed a renewed motion for summary judgment based on the deemed admissions. See id. The plaintiff provided responses but did not move for withdrawal of the deemed admissions under Rule 36(b), resulting in the "court find[ing] that the admissions are deemed admitted and not withdrawn." Id.
Under similar circumstances, in Weinberger v. Provident Life and Casualty Insurance Co., No. 97CIV.9262(JGK)(HBP), 1999 WL 225537, at *2 (S.D.N.Y. Apr. 19, 1999), the court denied the plaintiff's request to withdraw deemed admissions when discovery had closed and the draft responses supplied by the plaintiff with his Rule 36(b) motion did "not fully provide the information sought by defendant, . . . [which] sought explanations concerning any requests that plaintiff denied." More than six weeks after responses were initially due, the plaintiff had requested an extension of time, which the trial court denied "because, among other reasons, discovery had closed and permitting amended answers would deprive defendant of the ability to take follow-up discovery concerning those answers." Id. In denying the late-filed motion for extension of time, the court expressly held that the requests for admission were deemed admitted under Rule 36(a). Id. at *1. Perhaps more important for purposes of the motion to withdraw the deemed admissions, the court found that the plaintiff's proposed response was insufficient. See id. at *2.
Finally, a recent case in this district illustrates an appropriate denial of a non-responding party's request to withdraw deemed admissions. In Fulcher v. Wyndham Worldwide Operations, Inc., No. 3:18-CV-264-TAV-DCP, 2019 WL 4143292 (E.D. Tenn. Aug. 30, 2019), the plaintiffs failed to respond to a portion of the defendants' requests for admissions, arguing in response to the defendants' motion to deem the requests admitted that they had responded (albeit belatedly) to the first twelve requests but that the remaining unanswered requests were abusive and improper because they should have been served as interrogatories. Magistrate Judge Poplin allowed the belated responses to be construed as amendments to the admissions that were deemed by operation of Rule 36(a)(3). Id. at *3. As to the requests for which no response was provided, however, Judge Poplin concluded:
Id. at *4.
These cases are significantly analogous to the facts before the Court here and contrast with the cases cited by Defendants in support of the Motion to Withdraw and other decisions by trial courts within the Sixth Circuit that allowed withdrawal of deemed admissions.
After Defendants still did not respond within the response period of E.D. Tenn. LBR 7007-1(a) (as properly noticed by Plaintiff pursuant to E.D. Tenn. LBR 7007-1(c)), the Court entered the Order Deeming Admissions Admitted on November 26, 2019 — some fifty days after the responses were first due. Defendants continued to sit mute even after the Court deemed the admissions admitted until Plaintiff unilaterally
Further, Defendants failed to deny expressly in their answer some of the facts that are the subject of the eighteen deemed admissions. The deemed admissions mostly relate to Defendants' representations and intent when they obtained financing from Plaintiff. [Doc. 20-1 at pp. 17-18.] Plaintiff's complaint set forth an alleged transcript of "Pre-Funding calls" with Defendants. [Doc. 1 at ¶ 15.] Defendants' responded that they were "without sufficient knowledge to admit or deny" Plaintiff's allegations concerning the call. [Doc. 9 at ¶ 15.] Likewise, Plaintiff alleged that the agreements between the parties contained an acknowledgment that "any misrepresentation . . . in connection with this agreement may constitute a separate cause of action for fraud or intentional fraudulent inducement to obtain financing." [Doc. 1 at ¶ 16.] Although Plaintiff attached the agreements to the complaint and Defendants admitted that they entered into two contracts with Plaintiff [Doc. 9 at ¶ 10], Defendants repeated their response that they lacked "sufficient knowledge to admit or deny" the allegation concerning the acknowledgment in the agreements. [Doc. 9 at ¶ 16.] Although Defendants did expressly deny some of the Plaintiff's allegations that are restated in the requests for admissions, given Defendants' wholesale failure to engage in discovery, the Court does not accept Defendants' argument that they "steadfastly stand by the denial [in their answer] that they intentionally committed fraud in obtaining a factoring `loan' form [sic] Core Funding." [Doc. 27 at p. 3.]
Under these facts, even if the Court were to find that Defendants have met the first prong of the Rule 36(b) test that the deemed admissions will practically eliminate any presentation of the merits of the case,
Of course, the Court could extend the deadlines, reopen discovery, and move the trial date (which, notably, Defendants have not requested). To do so, however, would reward Defendants for their disrespectful approach to the applicable rules governing this litigation and to this Court and its rulings. The Court will not condone Defendants' conduct by extending the deadlines. Furthermore, to grant Defendants' Motion to Withdraw "would stand Rule 36 on its head." Whitaker v. Annamalai (In re Hindu Temple & Cmty. Ctr. of Ga., Inc. Bankr. No. 09-82915, Adv. No. 09-9080, 2012 WL 10739278, at *4 (Bankr. N.D. Ga. Jan. 6, 2012).
For these reasons, the Court exercises its "considerable discretion," Kerry Steel, Inc., 106 F.3d at 154, and will deny Motion to Withdraw by separate order.