*1 Fact Discovery Cutoff: February 14, 2022

Final Pretrial Conference: May 23, 2022

Trial: June 14, 2022

Plaintiff, Transamerica Life Insurance Company (“Transamerica”), by and through its attorneys, hereby files this [Proposed] Report and Recommendation to the District Court in accordance with this Court's December 7, 2021 Order (Dkt. 54).

I. INTRODUCTION

This [Proposed] Report and Recommendation is the culmination of a continuous, nine-month discovery dispute between the parties – a dispute that Transamerica won in the entirety and which led this Court to announce plainly in a written Order of November 22, 2021 that Defendants were to be sanctioned both monetarily and by the Court recommending to the District Judge that a default judgment be entered both in Transamerica's favor (on Transamerica's affirmative claims) and against Defendants (on Defendants' counterclaims) under Rule 37(b)(2)(A)(vi). (Dkt. 50, p. 2). On December 7, 2021, this Court formally ordered Transamerica to prepare and present this proposed Report and Recommendation to the District Court by December 20, 2021 for default judgment in favor of Transamerica and against Defendants on Transamerica's affirmative claims and Defendants' counterclaims, with prejudice. (Dkt. 54).

A. Background

This is a case in which Transamerica sued to redress a longstanding insurance fraud against the company. Defendants responded by lodging gratuitous counterclaims.

Transamerica issued Comprehensive Long-Term Care Insurance Rider (the “Rider”) to Flexible Premium Adjustable Life Insurance Policy, No. 015582502 (the “Policy”), to Defendant Anahit Arutyunyan (“Anahit”). The Policy insures Defendant Akop Arutyunyan (“Akop”), Anahit's father. (Dkt. 1, ¶¶ 14-15 & Ex. A). In the event that Akop met the Rider's benefit eligibility triggers, the Rider would pay benefits to reimburse Akop for payments he made in exchange for home care services he actually received. (Dkt. 1, ¶¶ 18-20).

On or about December 6, 2018, Akop initiated a claim for benefits under the Rider. He identified a left rotator cuff tear and spinal arthritis as the basis for the claim. (Dkt. 1, ¶ 22). On January 17, 2019, Akop underwent an onsite assessment with a nurse in his home to determine whether he was eligible to receive benefits under the Rider. (Dkt. 1, ¶ 23). Anahit was present for and actively assisted Akop with the onsite assessment. (Dkt. 1, ¶ 24). During that assessment, Defendants represented that Akop met the benefit eligibility triggers defined in the Rider, that Akop could no longer drive a car or shop for groceries, and that Akop was receiving two to five hours of paid care in his home each day. Furthermore, Akop purported to walk with an impaired gait and to require and use a walker for ambulation at all times. (Dkt. 1, ¶¶ 25-28). In conjunction with the assessment, Anahit provided a letter to Transamerica in her capacity as policyholder whereby she represented that Akop was unable to perform specific ADLs and that he hired a gentleman as his caregiver. (Dkt. 1, ¶ 29). Based on Defendants' representations, Transamerica approved Akop's claim and began paying benefits. (Dkt. 1, ¶ 30).

*2 Beginning in 2019, Transamerica determined that it was necessary and appropriate to investigate Defendants' claim for benefits, including an initial period of surveillance on Akop in February and March 2019, an Independent Medical Examination (“IME”) on April 30, 2019, and three additional periods of surveillance in April-May 2019 (in connection with the IME), July and September 2019. (Dkt. 1, ¶¶ 31-48, 52-54). The IME doctor, based in large part on Akop's subjective representations during the exam, initially opined that Akop was experiencing a reduced level of physical functionality that met the Rider's benefit eligibility triggers. (Dkt. 1, ¶ 37).

Transamerica performed four periods of surveillance on Akop. On each date of surveillance, Akop represented to Transamerica in signed and certified Proof of Loss statements that he received care services in his home from the male caregiver that he identified, including a list of the specific care services that he allegedly received. Acting in reliance on these submissions, Transamerica paid benefits to Akop under the Rider. (Dkt. 1, ¶¶ 32, 41, 45, 52). The surveillance revealed that Akop suffered from no physical limitation whatsoever and was malingering for the sake of obtaining benefits. Transamerica provided its surveillance video to the IME doctor and asked whether the video changed his opinion. The IME doctor concluded that Akop was fully functional, was malingering and was not eligible for benefits. (Dkt. 1, ¶¶ 55-56, 59).

Transamerica's four periods of surveillance also revealed that Akop's putative caregiver never once came to Akop's home on any date of surveillance, despite his repeated representations to the contrary. The surveillance revealed that Akop and the caregiver never saw one another and no care was provided. (Dkt. 1, ¶¶ 12, 33, 42, 46, 53). During the third period of surveillance, Transamerica also expanded its investigative efforts to include the purported caregiver, and Transamerica's surveillance on that gentleman confirmed that he did not provide care to Akop on the dates represented by Akop to Transamerica. (Dkt. 1, ¶ 47). Moreover, during all of the periods of surveillance, Akop was seen behaving with a high level of independence and functionality that was inconsistent with the notion that he was unable to perform any ADL without substantial assistance, or otherwise. (Dkt. 1, ¶¶ 43, 48, 54). As stated, the IME doctor reviewed the surveillance videos and noted the difference between the videos and how Akop was examined by him. He concluded that Akop was “marked exaggerating his disability” and he is able to perform all ADLs without substantial assistance. (Dkt. 1, ¶¶ 55-56, 59).

In addition, on or about August 22, 2019, Defendants jointly signed and submitted a letter to Transamerica, the effect of which was for Anahit to take assignment of Akop's benefit payments under the Rider. In that letter, Defendants falsely represented to Transamerica that the assignment of benefits to Anahit was necessary because “she is the one who pays the caregiver” for Akop's care. (Dkt. 1, ¶¶ 49-51).

Based upon all available information, Transamerica closed its investigation and denied Akop's claim for benefits. (Dkt. 1, ¶ 60).

Transamerica paid Defendants a total of $109,381.71 in benefits as a result of their common plan and scheme of knowing and intentional repeated misrepresentations of material facts with an intent to defraud Transamerica. (Dkt. 1, ¶71).

B. Relief Sought

This is an action in which Transamerica has asserted causes of action for fraud, civil theft, civil conspiracy, restitution of benefits paid and a declaration that the Policy is void. (Dkt. 1, Counts I-V).

*3 As a result of Defendants' repeated failure to comply with multiple Orders of this Court, Transamerica is entitled to default judgment in its favor and against Defendants on its affirmative claims and Defendants' counterclaims as follows:

Transamerica was harmed by paying benefits in the amount of $109,381.71 that Defendants were not lawfully entitled to receive and that would not have been paid but for their fraud. Defendants each received a portion of the benefit payments in exchange for participating in the fraudulent scheme against Transamerica. Transamerica incurred additional losses relating to its fees and cost of investigating the claim, all of which are recoverable as damages. (Dkt. 1, ¶¶ 71-73).

Defendants knew that the money they received in benefits payments from Transamerica was received through fraud and deceit, and that Transamerica would not have paid the money had it known the true facts about Akop's claim at the inception of the claim. Thus, Defendants knew the money they received from Transamerica was stolen. As a result of this theft, Defendants are liable to Transamerica in the amount of $109,381.71, plus interest, statutory treble damages, fees and costs pursuant to California Penal Code § 496(c). (Dkt. 1, ¶¶ 75-80).

As a result of the Defendants' knowing and intentional conspiracy of extracting insurance benefits from Transamerica through fraud and deceit, Transamerica was harmed by paying $109,381.71 in benefits that it would not have paid if it knew the true facts about the claim from the inception of the claim. (Dkt. 1, ¶¶ 82-85). Transamerica is also entitled to punitive damages in an amount deemed appropriate by the Court, as Defendants' conduct was protracted and egregious, and was of such a nature that it shocks the conscience. (Dkt. 1, ¶ 64).

Transamerica had no obligation to pay benefits under the Rider during some or all of the period of Defendants' claim due to one or more of: (1) Akop's lack of a qualifying ADL deficiency; (2) Akop's failure to receive care from any caregiver; (3) Akop's failure to receive the care represented to Transamerica; and/or (4) Akop's failure to pay for the care he received, if any. Because Transamerica has made an overpayment of benefits, Transamerica is entitled to restitution in the amount of the $109,381.71 in benefits paid by Transamerica. (Dkt. 1, ¶¶ 87-89).

Transamerica seeks and is entitled to a judicial declaration that the Policy is void under the inherent power of the Court to adjust the equities between the parties for two reasons: (a) because it would be inequitable for Transamerica to be required to remain in contractual privity with a policy owner who has proven herself incapable of proceeding in good faith in an ongoing contractual relationship with Transamerica; and (b) as a means of compensating Transamerica for a portion of the harm it has suffered as a result of Defendants' fraudulent conspiracy. (Dkt. 1, ¶ 91).

In the alternative, it is necessary and appropriate for the Court to declare the Policy void as a means of compensating Transamerica for a portion of the losses attributable to Defendants' fraudulent conspiracy. (Dkt. 1, ¶ 95).

*4 Finally, Transamerica seeks and is entitled to the dismissal with prejudice of Defendants' Counterclaim, including Count I for damage for breach of contract and Count II for damages for tortious breach of implied covenant of good faith and fair dealing. (Dkt. 16, Counterclaim and Prayer to Counterclaim).

Transamerica seeks and is entitled to additional monetary sanctions regarding the discovery dispute in this case. Counsel for Transamerica spent a total of 98.5 hours through December 10, 2021 at a cost of $37,873.00 to Transamerica addressing Defendants' discovery transgressions by motion.[1] See Affidavit of Dan Reese (“Reese Aff.”), Exhibit A, ¶ 11. This amount is reasonable as sanctions in light of the issues involved in theses Motions and the continued need for Plaintiff to come back to the Court a total of six times to address Defendants' continuing failure to comply with the Court's Local Rules regarding discovery disputes and the Court's Orders again and again over a period of nine months. Indeed, the Court has specifically announced in two Orders (Dkt. 37 and Dkt. 50) that sanctions are fully justified and should be awarded.

C. Discovery Dispute

The discovery dispute that forms the basis of this [Proposed] Report and Recommendation goes back more than nine months to March 5, 2021, when Transamerica received deficient discovery responses from Akop and Anahit to its First Set of Interrogatories and Requests for Production of Documents Directed to Defendants. (Dkt. 34-2, ¶¶ 5-8; Dkt. 35-2, ¶¶ 5-8). Transamerica followed the proper procedure under the Local Rules of this Court in an attempt to resolve the dispute. Transamerica wrote to counsel for Defendants regarding the various discovery deficiencies and counsel for the parties met and conferred. (Dkt. 34-2, ¶¶ 9-10; Dkt. 35-2, ¶¶ 9-10). However, Defendants did not provide supplemental discovery responses or documents as agreed upon by their counsel. (Dkt. 34-2, ¶ 18; Dkt. 35-2, ¶ 18).

On May 28, 2021, Transamerica was forced to take the next step. Counsel for Transamerica served its portion of the Joint Stipulations regarding Transamerica's Motions to Compel on counsel for Defendants pursuant to Rule 37 of Local Rules of Practice for the United States District Court for the Central District of California. (Dkt. 34-2, ¶ 19; Dkt. 35-2, ¶ 19). On June 2, 2021, counsel for Defendants made a limited supplemental production in which he failed to redress the ongoing deficiencies or even to turn over many categories of materials he had agreed to produce months earlier. (Dkt. 34-2, ¶ 20; Dkt. 35-2, ¶ 20). Counsel for Defendants also failed to provide Defendants' portions of the Joint Stipulations in a timely manner under Local Rule. 37-2.2. (Dkt. 34-2, ¶ 21; Dkt. 35-2, ¶ 21). In fact, Defendants did not provide their completed portions of the Joint Stipulations until four months later. Indeed, they only did so after Transamerica was forced to file Motions to Compel Supplemental Discovery from Defendants (Dkt. 34 and Dkt. 35); and, after this Court twice ordered Defendants to provide their portions of the Joint Stipulations. (Dkt. 37 and Dkt. 41).

*5 On September 1, 2021, the Court entered an Order regarding Transamerica's Motions to Compel Supplemental Discovery Responses and Documents from Defendants Akop and Anahit. (Dkt. 37). In the September 1 Order, the Court took note of Defendants' violation of the Local Rules, stating: “Defendants did not provide their portion of the Joint Stipulation. (Dkt. 34-1; Dkt. 35-1.) (Dkt. 34-2, Decl. of Goldis, ¶¶ 19-23; Dkt. 35-2, ¶¶ 19-23.) Nor did Defendants file any opposition to the Motions.” (Dkt. 37). Accordingly, the Court ordered “both Defendants to show cause by September 10, 2021 why it should not grant the Motions in their entirety.” (Id.). Accordingly, the Court admonished “both Defendants that, this being a Court order, failure to comply with it brings into play the full panoply of sanctions under Fed. R. Civ. P. Rule 37(b)(2)(A)(i)-(vii).” (Dkt. 37).

Notwithstanding that they were now under Court Order, Defendants still did not provide their portions of the Joint Stipulations or respond to the Court's Order to show cause by September 10, 2021. This was Defendants' first failure to follow a direct Order of the Court. Rather, on September 13, 2021, Defendants filed an untimely Response to the Court's Order to Show Cause, with which they included an improper and untimely Opposition to Transamerica's Motions to Compel Supplemental Discovery Responses and Documents from Akop and Anahit. (Dkt. 38).

On September 14, 2021, Transamerica filed a Supplemental Memorandum In Support of its Motions to Compel wherein it (1) asserted that the merits of Defendants' September 13 arguments in opposition to Transamerica's Motions to Compel should be disregarded by the Court and waived as untimely and (2) sought the Court's direction regarding sanctions to be entered against Defendants. (Dkt. 39).

On September 21, 2021, this Court entered another Order (its second) regarding Transamerica's Motions to Compel Supplemental Discovery Responses and Documents from Defendants Akop and Anahit. (Dkt. 41). This Court stated that the form of Defendants' Opposition was deficient, and “Defendants must provide their portion of the Joint Stipulation as was their obligation pursuant to Local Rule 37. The Court will not consider the running narrative in Defendants' Response and Objections unconnected to specific discovery requests.” (Dkt. 41, p.2). This Court then ordered “Defendants to provide Plaintiff with their portion of the Joint Stipulation within 10 days from the date of this Order. The parties are to meet and confer within 7 days thereafter. The parties have 7 days thereafter to file supplemental memoranda.” (Id.). The Court directed the parties to “confer in good faith to reduce or eliminate issues for the Court to resolve.” (Id.)

In accordance with the September 21, 2021 Order, Defendants finally provided their portions of the Joint Stipulations on October 1, 2021 (some 119 days after they were obligated by Rule to do so, and 21 days after the Court initially ordered them to do so) and the parties met and conferred on October 7, 2021. On October 8, 2021, Transamerica filed the completed Joint Stipulations with the Court (Dkt. 42 and Dkt. 43), and the Court provided a Scheduling Notice reminding the parties that Supplemental Memoranda were due on October 15, 2021. (Dkt. 44).

On October 15, 2021, Transamerica filed Supplemental Memoranda In Support of the Motions to Compel Supplemental Discovery Responses and Documents from Defendants Akop and Anahit. (Dkt. 45 and Dkt. 46). As of that date, Defendants still had not provided any further supplemental discovery responses or documents at the time that Transamerica filed these Supplemental Memoranda. (Id.) Moreover, Defendants simply did not file Supplemental Memoranda as directed by the Court's September 21, 2021 Order and October 8, 2021 Scheduling Notice. These were the second and third instances in which Defendants failed to follow a direct Order of the Court.

*6 On October 20, 2021, this Court entered a third Order regarding Transamerica's Motions to Compel Supplemental Discovery Responses and Documents from Defendants Akop and Anahit. (Dkt. 47). The Court ordered, inter alia, as follows:

(Dkt. 47, p. 1). The October 20, 2021 Order further stated: “Also reference is made to Exhibits to Responses to Request for Production, Set One. These exhibits do not appear in the docket so far as the Court can tell. The parties are ORDERED to provide same to the Court or identify where in the record they can be found, within 7 days of this Order.” (Dkt 47, p. 2).

Pursuant to the Court's Order of October 20, 2021 (Dkt. 47), Transamerica advised counsel for Defendants, by email dated October 28, 2021, of what remained in dispute and what should be done to make Defendants' discovery responses complete. (Dkt. 49, ¶ 3; Dkt. 49-1, pp. 4-5). Counsel for Defendants did not respond to this email and did not call counsel for Transamerica. (Dkt. 49, ¶ 7). Therefore, on October 29, 2021, Transamerica filed a Notice of Narrowed Issues on Transamerica's Motions to Compel Supplemental Discovery Responses and Documents from Defendants Akop and Anahit (Dkt. 48), which Notice followed the Court's Order of October 20, 2021 (Dkt. 47).

Defendants failed to comply with the Court's Order of October 20, 2021. (Dkt. 49). Despite Transamerica advising Defendants what remained in dispute and what should be done to make responses complete on October 28, 2021, Transamerica did not receive any additional supplemental responses from Defendants by November 5, 2021, pursuant to the Court's October 20, 2021 Order. (Dkt. 49, ¶¶ 3-4). This was the fourth instance in which Defendants failed to follow a direct Order of the Court. Further, despite Transamerica's diligent attempts to comply with the Order, Defendants did not give Transamerica a meet and confer and/or join in a status report to the Court. These were the fifth and sixth instances in which Defendants failed to follow a direct Order of the Court. Rather, after multiple emails and calls by Transamerica's counsel over a period of 21 days, counsel for Defendants finally responded to counsel for Transamerica, on November 18, 2021, advising that “I received your email. We are in the middle of an FSC today, and all that goes with it, but I will be dealing with this as soon as possible.” (Dkt. 49, ¶¶ 6-10; Dkt. 49-1, pp. 2-4). Thereafter, Counsel for Transamerica received no further response from defense counsel. (Dkt. 49, ¶ 11). As a result, Transamerica could not a file “a Joint Status Report by November 19, 2021 identifying what remains in dispute for the Court to resolve,” as directed by the Court. (Dkt. 47). Instead, on November 19, 2021, Transamerica filed a Declaration regarding Defendants' failure to comply with the Order of October 20, 2021 and the issues that remained in dispute for the Court to resolve. (Dkt. 49). A copy of defense counsel's November 18, 2021 email was included in Exhibit A that Declaration. (Dkt. 49-1, p. 2).

*7 On November 22, 2021, this Court entered an Order granting Transamerica's Motions to Compel Supplemental Discovery Responses and Documents from Defendants Akop and Anahit in their entirety. The Court's Order of November 22, 2021 stated: “Defendants' conduct in violating three separate provisions of this Court's October 20, 2021 Order is inexcusable.” (Dkt. 50, p. 1). The Court ordered Defendants to produce the following documents and information by November 30, 2021:

(Dkt. 50, pp. 1-2). The Court's Order of November 22, 2021 further stated: “By violating this Court's Order, Defendants lost the right to dispute any of the above requests that they had not already agreed to produce. Rule 37(b)(2). Failure to comply with this Order by November 30, 2021 will result in a recommendation to the District Court for default judgment pursuant to Rule 37(b)(2)(A)(vi).” (Dkt. 50, p. 2). Further, the Court issued “an Order to Show Cause by November 30, 2021 why the Court should not impose monetary sanctions on Defendants for their multiple violations of this Court's Order of October 20, 2021.” (Id.) The Court further added that “Transamerica may file a response by December 7, 2021.” (Id.)

Shockingly, despite knowing full well the consequences of continuing to flout the Court's Orders, Defendants did not comply with the November 22, 2021 Order. Defendants failed to produce supplemental discovery responses and documents and Defendants failed to respond to the Order to Show Cause regarding sanctions by November 30, 2021.

On December 1, 2021, Transamerica filed a Notice and Declaration Regarding Defendants' Failure to Comply with the Court's November 22, 2021 Order. (Dkt. 52 and Dkt. 52-1). Defendants did not produce the documents and information set forth in the Court's Order by November 30, 2021, as directed in the Order. (Dkt. 52-1, ¶ 3). This was the seventh instance in which Defendants failed to follow a direct Order of the Court. As of December 1, 2021 and continuing to this time, no additional materials of any nature have been provided (Dkt. 52-1, ¶ 4), and Defendants remain in open violation of the Court's Orders. Defense counsel did not even contact Transamerica to advise why no production occurred or to propose a solution. (Dkt. 52-1, ¶ 5). Further, Defendants did not respond to the Court's Order to Show Cause by November 30, 2021 why the Court should not impose monetary sanctions on Defendants for their multiple violations of this Court's Order of October 20, 2021. (Dkt. 52-1, ¶ 6). This was the eighth instance in which Defendants failed to follow a direct Order of the Court.

On December 7, 2021, this Court entered an Order, which stated, inter alia, as follows:

(Dkt. 54).

*8 On December 9, 2021, having openly and directly violated this Court's prior orders eight times, Defendants filed a Request for Reconsideration of Termination Sanctions Minute Order Recommending Judgment for Failure to Respond to Discovery along with a supporting Declaration of counsel for Defendants. (Dkt. 55). In this Request for Reconsideration, counsel for Defendants attempted to improperly object to the production of discovery that Defendants agreed to and were ordered to produce. Further, as previously stated, by violating this Court's Orders, Defendants lost the right to dispute any of the materials that remained in issue that they had not already agreed to produce. (Dkt. 50, p. 2). Moreover, in this Request for Reconsideration, counsel for Defendants continued to provide a running narrative of Defendants' responses and objections unconnected to specific discovery requests and unrelated to what remained at issue prior to the entry of the Court's November 22, 2021 Order granting Transamerica's Motions in their entirety. (Doc. 55, p. 4).

Defendants lost the opportunity to further object or withhold supplemental discovery responses or documents when is failed to comply with the Court's Order of October 20, 2021. Further, when Defendants failed to comply with this Court's Order of November 22, 2021, Defendants risked the entry of default judgment against them as to Transamerica's affirmative claims and their Counterclaim.

As of the present time, Defendants still have not complied with this Court's Orders. They have not cured any of the outstanding discovery deficiencies, which definitely would require the production of additional materials. Further, Defendants have not shown cause why both monetary sanctions and a default judgment should not be entered against them. Accordingly, Defendants' Request for Reconsideration of Termination Sanctions should be denied.

II. DISCUSSION

A. Default Judgment

Because Defendants failed to comply with this Court's Orders eight times, a default judgment pursuant to Rule 37(b)(2)(A)(vi) should be entered on Transamerica's affirmative claims and Defendants' counterclaims with prejudice. (Dkt. 54). This measure of relief was specifically contemplated in this Court's November 22, 2021 Order, where, having acknowledged Defendants' prior transgressions, the Court wrote: “Defendants' conduct in violating three separate provisions of this Court's October 21, 2021 Order is inexcusable.... Failure to comply with this [November 22, 2021] Order by November 30, 2021 will result in a recommendation to the District Court for default judgment pursuant to Rule 37(b)(2)(A)(vi).” (Dkt. 50, pp. 1-2).

Federal Rule of Civil Procedure 37 permits sanctions against a party who fails to obey an order to provide or permit discovery. See Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006); Fed. R. Civ. P. 37(b)(2)(A). Rule 37 “authorizes the district court, in its discretion, to impose a wide range of sanctions when a party fails to comply with the rules of discovery or with court orders enforcing those rules.” Johnson v. Sisodia, Case No.: 1:12-cv-02044-SAB (PC), 2015 U.S. Dist. LEXIS 50444 at *4, 2015 WL 1746553, at *2 (E.D. Cal. Apr. 16, 2015); citing Wyle v. R.J. Reynolds Indus. Inc., 709 F.2d 585, 589 (9th Cir. 1983) (citing Nat'l Hockey League v. Metro. Hockey Clubs, 427 U.S. 639, 643, 96 S.Ct. 2778, 49 L.Ed.2d 747 (1976)).

*9 In this case, an award of all available sanctions is appropriate. Rule 37 provides that the Court may dismiss an action “in whole or in part” or “render[ ] a default judgment against the disobedient party.” Fed. R. Civ. P. 37(b)(2)(A)(v) & (vi). Dismissal and default are appropriate only when circumstances evidence willful disobedience of court orders or bad faith conduct. Fjelstad v. Am. Honda Motor Co., 762 F.2d 1334, 1337 (9th Cir. 1985). “ ‘[D]isobedient conduct not shown to be outside the control of the litigant’ is all that is required to demonstrate willfulness, bad faith, or fault.” Henry v. Gill Indus., Inc., 983 F.2d 943 948 (9th Cir. 1993) (quoting Fjelstad, 762 F.2d at 1341).

Defendants undeniably fall within the scope of litigants to which the penalty of dismissal and default judgment should be applied. Indeed, they have not complied with their obligations arising under Rule or Court Orders to make discovery. Their discovery was deficient from the inception of the discovery process. This was followed by multiple failures to timely participate in the joint stipulation process so the matter could be raised with the Court. And then, once the matter was raised by Transamerica with the Court, Defendants willfully disregarded Order after Order as if to thumb their nose at the bench. So egregious was this conduct that Defendants failed even to respond at all to the Court's Order of November 22, 2021, in which the Court plainly and succinctly advised that Defendants' failure to take certain steps and cure certain deficiencies before November 30, 2021 would result in a recommendation of dismissal under Rule 37 and monetary sanctions. (Dkt. 50, p. 2). In fact, not only did Defendants not do as ordered by the Court, they did not even respond at all nor even contact Transamerica to discuss the matter. This repeated conduct, as the Court has already noted, is “inexcusable.”

For these reasons, this Court recommends that a default judgment be entered in Transamerica's favor awarding all damages and declaratory relief sought in Transamerica's Complaint, plus fees and costs, as follows:

This award includes Transamerica's damages relating to its cost of investigating the claim, which Transamerica is entitled to in connection with its fraud claim. Counsel for Transamerica spent a total of 41.3 hours through April 30, 2020 at a cost of $14,455.00 to Transamerica addressing the investigation of this matter. Reese Aff., ¶10.

*10 This Court further recommends that Defendants' Counterclaim, including Count I for damage for breach of contract and Count II for damages for tortious breach of implied covenant of good faith and fair dealing, be dismissed with prejudice in its entirety of. (Dkt. 16, Counterclaim and Prayer to Counterclaim).

B. Sanctions

In addition to terminating the case under Rule 37, Transamerica should be awarded monetary sanctions, including all of its fees involved, as a result of Defendants' obstructionist conduct in failing to make discovery and, in turn, requiring Transamerica to make filing after filing with the Court in order to seek redress. The Court “must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees, caused by the failure” to comply with Court orders. Fed. R. Civ. P. 37(b)(2)(C). District courts are given “particularly wide latitude” to issue Rule 37 sanctions. Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 2001).

In this case, Transamerica has been forced again and again, over the course of nine months, to return to the Court because of Defendants' refusal to cooperate with counsel for Transamerica in the discovery process and Defendants' failure to comply with the Court's Orders and produce discovery and documents ordered by the Court. As a result of Defendants' conduct and refusal to comply with the discovery process set forth by this Court, Plaintiff's prosecution of this case has been stymied.

For these reasons, this Court recommends that Transamerica be awarded the following fees incurred by Transamerica in addressing Defendants' discovery transgressions by motion in this case:

Counsel for Transamerica spent a total of 98.5 hours through December 10, 2021 at a cost of $37,873.00 to Transamerica addressing Defendants' discovery transgressions by motion. Reese Aff., ¶11. This amount includes: