Full Tilt Boogie, LLC v. Kep Fortune, LLC
Full Tilt Boogie, LLC v. Kep Fortune, LLC
2021 WL 7285992 (C.D. Cal. 2021)
December 28, 2021

Scott, Karen E.,  United States Magistrate Judge

Adverse inference
Exclusion of Evidence
Cost Recovery
Failure to Produce
Bad Faith
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Summary
The court found that KEP Fortune LLC and Mohajerian APLC were jointly and severally liable for attorney fee sanctions under Rule 37 of the Federal Rules of Civil Procedure. The court found that Counsel had an obligation to make a reasonable effort to assure that the client had provided all the information and documents available to him that are responsive to the discovery demand, including making a reasonable inquiry into the factual basis of his response, request, or objection. As a result, the court ordered KEP and Counsel to pay Plaintiff a sanctions award of $12,759 within 30 days.
Additional Decisions
FULL TILT BOOGIE LLC
v.
KEP FORTUNE LLC, et al
Case No. 2:19-cv-09090 ODW (KESx)
United States District Court, C.D. California
Filed December 28, 2021

Counsel

Maria Barr for Jazmin Dorado, Courtroom Clerk, ATTORNEYS PRESENT FOR PLAINTIFF: None Present
Not Present, Court Reporter, ATTORNEYS PRESENT FOR DEFENDANTS: None Present
Scott, Karen E., United States Magistrate Judge

PROCEEDINGS (IN CHAMBERS): Order GRANTING Plaintiff's Motion for Attorney's Fees (Dkt. 180)

I. PROCEDURAL BACKGROUND.
*1 On October 21, 2021, the Court issued a Final R&R, granting in part Plaintiff's motion to further compel (Dkt. 104), sanctioning KEP with an adverse instruction and limiting evidence, and authorizing Plaintiff to file a motion for attorney's fees. (Dkt. 173.) The District Judge accepted the Final R&R on October 26. (Dkt. 175.) In particular, the Final R&R found:
• KEP's supplemental response to ROG 1 was improper and was stricken.
• KEP's supplemental responses to ROGs 15–19 were deficient, and accordingly (1) paragraph 15 of KEP's Cross-Complaint was stricken and KEP was precluded from entering any evidence or arguing that Cross-Defendants “purchased goods from unapproved suppliers and also purchased goods of a quality lesser than that required pursuant to the franchise agreement”; and (2) paragraph 37 of KEP's Cross-Complaint was stricken and KEP was precluded from entering any evidence or arguing that “James Kirner has spoken negatively to clients, his staff, and other franchisees regarding KEP” and that his statements caused any other franchisees to do or not to do anything.
• KEP's supplemental responses to RFPs 10–12 and 21 were deficient, and accordingly KEP was precluded at trial from relying on any documents not produced prior to July 30, 2021, to dispute (1) the profits it derived from required inventory purchases, (2) that it shipped inventory or other goods to Plaintiff that Full Tilt did not order, (3) whether it imposed price increases on Full Tilt, and (4) that Plaintiff experienced delays in receiving orders.
• KEP's supplemental response to RFP 28 was deficient, and accordingly, Plaintiff was entitled to an adverse inference, instructing the jury it may infer that KEP did not produce these documents because it believed that this information would help Plaintiff and harm Defendants.
• KEP's privilege log was deficient and KEP was given seven days to supplement it.
(Dkt. 173 at 7–8, 10–12, 14–20.) The Final R&R further determined that (1) KEP's position in resisting discovery was not substantially justified and (2) KEP's deficient discovery was in violation of the Court's June 9, 2021 Order. (Id. at 23.) The Final R&R emphasized that the Court could order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees, caused by the failure.” (Id.)
 
On November 9, 2021, Plaintiff filed its Motion for Attorney's Fees (Dkt. 180 [“Fee Motion”]), along with a memorandum in support (Dkt. 181). On November 19, 2021, Defendants filed their opposition. (Dkt. 187, 188.) On November 30, 2021, Plaintiff filed its reply. (Dkt. 189.) A telephonic hearing was held on December 14, 2021. (Dkt. 190.) For the reasons stated herein, the Fee Motion is GRANTED.
 
II. LEGAL STANDARD.
Rule 37 provides as follows:
If the motion is granted, ... the court must, after giving an opportunity to be heard, require the party or deponent whose conduct necessitated the motion, the party or attorney advising that conduct, or both to pay the movant's reasonable expenses incurred in making the motion, including attorney's fees.
*2 Fed. R. Civ. P. 37(a)(5)(A) (emphasis added). As set forth above, the Court determined in its Final R&R that Defendants' position in resisting discovery was not substantially justified. (Dkt. 173 at 23.) Accordingly, having given Defendants the opportunity to be heard at telephonic hearings on the motion to further compel and the Fee Motion on September 2 and December 14, 2021, the Court finds that an expense award, “including attorney's fees,” is appropriate.
 
Reasonable attorneys' fees are based on the “lodestar” calculation set forth in Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). See Fischer v. SJB.P.D., Inc., 214 F.3d 1115, 1119 (9th Cir. 2000); Bird v. Wells Fargo Bank, 16-cv-01130, 2017 U.S. Dist. LEXIS 151629, at *3, 2017 WL 4123715, at *1 (E.D. Cal. Sep. 18, 2017) (“[D]istrict courts have applied lodestar when sanctions are appropriate under Rule 37.”). The Court must first determine a reasonable fee by multiplying “the number of hours reasonably expended on the litigation” by “a reasonable hourly rate.” Hensley, 461 U.S. at 433. “A district court should exclude from the lodestar amount hours that are not reasonably expended because they are ‘excessive, redundant, or otherwise unnecessary.’ ” Van Gerwen v. Guarantee Mut. Life Co., 214 F.3d 1041, 1045 (9th Cir. 2000) (quoting Hensley, 461 U.S. at 434). “The lodestar amount is presumptively the reasonable fee amount, and thus a multiplier may be used to adjust the lodestar amount upward or downward only in ‘rare’ and ‘exceptional’ cases, supported by both ‘specific evidence’ on the record and detailed findings by the lower courts that the lodestar amount is unreasonably low or unreasonably high.” Id. (citations omitted).
 
“The fee applicant bears the burden of documenting the appropriate hours expended in litigation and must submit evidence in support of those hours worked.” Gates v. Deukmejian, 987 F.2d 1392, 1397 (9th Cir. 1992). “The party opposing the fee application has a burden of rebuttal that requires submission of evidence to the district court challenging the accuracy and reasonableness of the hours charged or the facts asserted by the prevailing party in submitted affidavits.” Id. at 1397–98.
 
III. DISCUSSION.
Plaintiff seeks $12,759 in fees for 41.1 hours to brief and argue its motion to further compel. (Dkt. 181 at 3, 5.) Plaintiff asserts that attorney Kish spent 35.1 hours ($295/hr.), attorney Lloyd spent 5.1 hours ($400/hr.), and attorney Kreutzer spent 0.9 hours ($405/hr.). (Dkt. 181-1 [Lloyd Decl.] ¶¶ 5–6.) The Fee Motion includes itemized monthly invoices and a spreadsheet summarizing the work done. (Dkt. 181-1, Exs. 1–2.) Plaintiff requests that the fee award should be imposed jointly and severally against KEP and its counsel. (Dkt. 181 at 10.)
 
In its opposition, Defendants do not dispute the hourly rates requested by Plaintiff.[1] Instead, they make the following arguments:
 
A. Bad Faith.
Defendants contend that because the Court did not make “a specific finding that Defendant KEP['s] ‘deficient’ responses or production was in ‘bad faith,’ ... the fees as sanctions should be limited.” (Dkt. 187 at 4.) But generally, there is no requirement that a court make a “bad faith” finding before imposing sanctions under Rule 37. Hyde & Drath v. Baker, 24 F.3d 1162, 1171 (9th Cir. 1994), as amended (July 25, 1994) (“We have not required a finding of bad faith on the part of the attorney before imposing sanctions under Rule 37.”); cf. Sigliano v. Mendoza, 642 F.2d 309, 310 (9th Cir. 1981) (“Where the drastic sanctions of dismissal or default are imposed, however, the range of discretion is narrowed and the losing party's non-compliance must be due to willfulness, fault or bad faith.”); accord Spencer v. Lunada Bay Boys, No. CV1602129SJORAOX, 2018 WL 839862, at *1, 2018 U.S. Dist. LEXIS 22779, at *5 (C.D. Cal. Feb. 12, 2018) (“There is no requirement in Rule 37[ ] or the Committee Notes that a court must make a finding of bad faith before imposing monetary sanctions, and district courts have imposed monetary sanctions pursuant to Rule 37[ ].”) (collecting cases), aff'd, 806 F. App'x 564 (9th Cir. 2020).
 
*3 Defendants also argue that the fees should be reduced because they were not sanctioned for all of their discovery responses. (Dkt. 187 at 4–6.) But that is not the standard for imposing fees pursuant to Rule 37. Instead, the standard is whether Defendants' discovery responses were “substantially justified,” which the Court found they were not. (Dkt. 173 at 23.) Defendants provides no authority for the proposition that Plaintiff's fees for bringing the further motion to compel should be reduced proportionately with the number of discovery responses that the Court found deficient. While the Court has the discretion to “apportion the reasonable expenses” if a discovery motion is granted in part and denied in part, Fed. R. Civ. P. 37(a)(5)(C), here it chooses not to. See Balla v. Idaho, 677 F.3d 910, 915 (9th Cir. 2012) (reviewing “attorneys' fee awards for abuse of discretion”); King v. GEICO Indem. Co., 712 F. App'x 649, 651 (9th Cir. 2017) (The decision to award reasonable fees under Federal Rule of Civil Procedure 37(a)(5) is ... reviewed for abuse of discretion.”).
 
B. Excessive Hours Claimed.
Defendants argue that the number of hours claimed by Plaintiff is not reasonable because some of the charges do not relate to the preparation of the motion to further compel. (Dkt. 187 at 6–10.) But Defendants ignore that Plaintiff has already substantially reduced its request to exclude time entries unrelated to the motion to further compel. Indeed, while the time entries total 68.7 hours, Plaintiff excluded 27.6 hours from its fee request. (Dkt. 181 at 5 n.1; Lloyd Decl. ¶¶ 3–4 & Ex.2; Dkt. 189 at 4–6.)
 
Defendants contend that some of the time claimed was for reviewing records that Plaintiff “would have reviewed for trial purposes.” (Dkt. 187 at 10–11.) But Plaintiff needed to make at least a cursory review of the records to determine if KEP's production was sufficient before deciding whether to file its motion to further compel. Indeed, Plaintiff is requesting only 5.9 hours related to reviewing the sufficiency of KEP's document production (Dkt. 189 at 9–10), which the Court finds reasonable.
 
The Court finds that the time spent on the motion to further compel and related filings was reasonable. Courts “should defer to the winning lawyer's professional judgment as to how much time [she] was required to spend on the case; after all, [she] won, and might not have, had [she] been more of a slacker.” Moreno v. City of Sacramento, 534 F.3d 1106, 1112 (9th Cir. 2008). “An attorney's sworn testimony that, in fact, it took the time claimed is evidence of considerable weight on the issue of the time required.” Blackwell v. Foley, 724 F. Supp. 2d 1068, 1081 (N.D. Cal. 2010) (citation omitted). Indeed, to reduce the number of hours submitted, “it must appear that the time claimed is obviously and convincingly excessive under the circumstances.” Id. (citation omitted). Here, the number of hours submitted by Plaintiff is neither obviously nor convincingly excessive. Other California federal courts have found similar fees reasonable for Rule 37 sanctions. See, e.g., Abraxis Bioscience, LLC v. Sabyent, Inc., No. CV 10-2255-GW (SHX), 2011 WL 13214013, at *2, 2011 U.S. Dist. LEXIS 162990, at *6 (C.D. Cal. July 26, 2011) (awarding $50,608 in sanctions for a Rule 37 violation); Prasad v. Cty. of Sutter, No. 2:12-CV-00592, 2013 WL 3773894, at *4, 2013 U.S. Dist. LEXIS 100085, at *11 (E.D. Cal. July 17, 2013) (awarding $18,022.50 in sanctions for a Rule 37 violation); Youngevity Int'l, Corp. v. Smith, No. 16-CV-00704, 2018 WL 2113238, at *9, 2018 U.S. Dist. LEXIS 77659, at *31 (S.D. Cal. May 7, 2018) (awarding $17,698.03 in sanctions for a Rule 37 violation).
 
C. Failure to Meet and Confer.
Defendants complain that Plaintiff failed to meet and confer before filing the instant attorney's fees motion. (Dkt. 187 at 7–8.) But in July 2021, the Court explicitly excused the parties from the meet-and-confer requirements before filing discovery-related motions. (Dkt. 102 at 3) (“To the extent Plaintiff may file a motion for evidentiary sanctions or other serious, discovery-related sanctions, such motions should be filed as regularly noticed motions to be heard by the Magistrate Judge. The parties are excused from pre-filing meet and confer requirements for discovery sanctions motions.”). Moreover, the Final R&R did not order the parties to meet and confer before Plaintiff filed its motion for fees. (See Dkt. 173 at 23–24) (“[W]ithin 14 days of any order adopting this R&R, Plaintiff shall file a motion to recover attorney's fees from KEP and/or KEP's counsel, presenting its request and describing why such fees and costs were reasonably incurred. The Court will thereafter give Defendants and counsel an opportunity to respond.”).
 
D. Jointly and Severally Liable.
*4 The Court has the discretion to assess fee sanctions against “the party or attorney advising that conduct, or both.” Fed. R. Civ. P. 37(a)(5)(A). Defendants' counsel asserts that he did not have early possession of the discovery and therefore should not be held responsible for KEP's deficient July production. (Dkt. 187 at 11–14.)
 
But Counsel's discovery obligations were not merely to pass on discovery gathered by his client. Instead, Counsel's obligations included (1) assuring that his client's search for information was thorough, (2) responding to warning signs that his client's search was woefully inadequate, and (3) ensuring that his client's responses were truthful and complete. See Qualcomm Inc. v. Broadcom Corp., No. 05CV1958, 2008 WL 66932, at *13, 2008 U.S. Dist. LEXIS 911, at *45 (S.D. Cal. Jan. 7, 2008), vacated in part, No. 05CV1958, 2008 WL 638108, 2008 U.S. Dist. LEXIS 16897 (S.D. Cal. Mar. 5, 2008). Further, the federal rules impose a duty of good faith and reasonable inquiry on all attorneys involved in pretrial discovery. See Fed. R. Civ. P. 26(g) Advisory Committee Notes (1983) (“Rule 26(g) imposes an affirmative duty to engage in pretrial discovery in a responsible manner that is consistent with the spirit and purposes of Rules 26 through 37 [and] ... obliges each attorney to stop and think about the legitimacy of a discovery request, a response thereto, or an objection.”). Thus, Counsel must “make a reasonable inquiry into the factual basis of his response, request, or objection.” Id. This inquiry includes making “a reasonable effort to assure that the client has provided all the information and documents available to him that are responsive to the discovery demand.” Id.
 
Here, the Court found that KEP's deficient production was exacerbated by Counsel's unreasonable interpretations of discovery requests (RFPs 12, 21, 28). For example, at the September 2021 hearing, Counsel unreasonably interpreted RFP 12, which requested all documents relating to price increases imposed on Plaintiff, as seeking only documents evidencing price increases that were unilaterally imposed by KEP on Full Tilt. (Dkt. 173 at 15–16.) Thus, the Court found that Counsel unreasonably determined that any documents indicating that KEP passed on price increases from its suppliers to Full Tilt were not responsive. (Id.) Similarly, Counsel unreasonably determined that any documents evidencing delays caused by KEP's suppliers would not be responsive to RFP 21, which requested all documents relating to delays in processing or delivering orders. (Id. at 17–18.) With regard to RFP 28, Counsel unreasonably asserted that any transaction reports involving the Systemwide Marketing Fund were not “communications” and did not involve “management and operation” of the Fund. (Id. at 18–19.)
 
Even were the Court to “excuse” Counsel because of the delay in receiving documents from his client—which the Court is not—such “delay” would not adequately explain the contradictory responses to RFPs 10 and 11. In KEP's supplemental responses to RFPs 10 and 11, it indicated that it had produced all responsive records. (Dkt. 62–14 at 10.) After the Court's June 2021 Order found that KEP had failed to locate all responsive information (Dkt. 72 at 19), KEP's further responses to RFPs 10 and 11 indicated “no such document exists or ever existed.” (Dkt. 104-5 at 5.) As the Court found in the Final R&R, “KEP's supplemental response and further response are internally inconsistent; either there are responsive documents or there are none.” (Dkt. 173 at 14–15.) Nor would the client's “delay” in transmitting documents to Counsel excuse Counsel's improper response to ROG 1 or the deficient privilege log. (Id. at 7–8, 19–20.)
 
*5 At the hearing, Counsel argued that he should have withdrawn earlier due to nonpayment of attorney's fees, but he wanted to assist his clients and expected the case to settle. However, once Counsel chose not to withdraw, his representation continued subject to an attorney's duties of competence and diligence—duties that include all the efforts to verify the accuracy of clients' discovery responses described above.
 
In its discretion, the Court finds that KEP and Counsel are jointly and severally liable for the Rule 37 attorney fee sanctions.
 
IV. ORDER.
Based on the above, KEP Fortune LLC and Mohajerian APLC are ORDERED, Jointly and Severally, to pay Plaintiff a sanctions award of $12,759 pursuant to Rule 37. Payment shall be made within 30 days of this Order.

Footnotes
Courts in this district have found that a rate of $450 per hour “is reasonable.” Sandoval v. Yeter, No. CV180867CBMJPRX, 2019 WL 7905731, at *3, 2019 U.S. Dist. LEXIS 227406, at *8 (C.D. Cal. Oct. 31, 2019) (“the requested rate of $450, which has not specifically been challenged, is reasonable”) (collecting cases).