*1 West Shore Home, LLC, has turned to the court again for help after another unsuccessful attempt to get Defendants Neil Wenz, Jacqueline Wenz, and East Coast Shower and Bath, LLC, (collectively, the Wenzes) to participate in this case. West Shore asks the court to compel the Wenzes to respond to certain discovery requests. West Shore also requests costs and attorney's fees incurred in bringing this motion. And finally, West Shore asks the court to enter a default judgment as a sanction against the Wenzes. Because the Wenzes have repeatedly violated the court's orders, the district court should enter a default judgment against them.

I. Background

Neil Wenz used to work for West Shore Home, LLC, a home remodeling business. He and his wife, Jacqueline Wenz, run their own bathroom remodeling business, East Coast Shower and Bath. West Shore sued the couple and their company for their unauthorized access and use of West Shore's customer relationship management platform. Compl., D.E. 1.

The Wenzes' conduct in this litigation has been problematic from the start. They started off by missing the answer deadline. Though they attributed this failing to issues related to their change in counsel, their habit of missing deadlines continued even after they obtained new attorneys.

The parties agreed in their Rule 26(f) report that the Wenzes' electronic devices would undergo forensic examination. Joint Rule 26(f) Report, D.E. 42 ¶3(i). But the Wenzes later refused to turn the devices over. So West Shore moved to compel forensic examination of those devices. Pl.'s Mot. to Compel, D.E. 44. The Wenzes did not respond to the motion.

So the court granted the motion and ordered the Wenzes to identify “all Devices Defendants used in any way in the operation of East Coast's business.” July 30, 2021 Order, D.E. 47 ¶1. It specifically required identification of “any phones, computers tablets, and routers owned or within the possession or control of any Defendant during the period of September 4, 2020 through the date of issuance of this Order.” Id. The Wenzes were required to make these devices available for examination within 21 days. Id. ¶3. And by September 3, 2021, they were to pay West Shore $8,950 for the expenses incurred in bringing the Motion to Compel. Id. ¶9; Stipulated Order for Award of Attorney's Fees, D.E. 50 ¶2.

But the Wenzes disregarded the court's deadline for making their devices available for forensic examination. And they also failed to pay the $8,950 judgment. So West Shore moved for contempt and sanctions. Pl.'s Mot. for Contempt and Sanctions, D.E. 52. Only after West Shore filed its motion did the Wenzes comply with the court's order.

Despite their belated compliance, the court still held a hearing on the motion. The couple attended in person. The court warned them that court deadlines carry the force of law and that missing more deadlines may lead to default judgment against them. Mr. Wenz explained to that he had been dealing with his substance abuse issues and that this had played a role in his failure to meet deadlines and participate in discovery. Defense counsel also noted that since Mr. Wenz was unemployed and Mrs. Wenz was a stay-at-home mom to her two minor children, money was tight.

*2 So the court imposed a fine of only $500, noting that any greater sanction would be unjust given the circumstances. Order, D.E. 63. But the court again warned that “[g]oing forward, if Defendants violate the terms of this or any other order, the court may impose any sanction allowed by law, including entry of default judgment against them.” Id.

After that, West Shore wrote to the Wenzes about deficiencies with their productions. The Wenzes served additional responses, but they too were deficient. The Wenzes have not responded to West Shore's attempts to address those deficiencies.

The forensic reports from the Wenzes' devices revealed that the Wenzes had again violated the July 30 Order by not identifying all ESI sources and not submitting them for forensic review. Specifically, West Shore points to a computer used by the Wenzes and ECSB that they did not produce for forensic examination. And the forensic examination revealed two email addresses the Wenzes used for ECSB business that they failed to disclose.[1]

West Shore suspected that the Wenzes used a computer in connection with ECSB, see D.E. 65–12 at 6, but Defendants maintained that they only used iPads and personal phones. But text messages between the Wenzes from March 2021 reveal that they used a computer too. And both undisclosed email addresses were used to set up appointments and communicate with customers.

West Shore believes electronically stored records have been “manipulated or withheld” by the Wenzes. In support of this accusation, it points to months of missing phone calls and missing content in conversations between the Wenzes and customers. West Shore also calls attention to a message between the Wenzes from after the initiation of this suit in which Mr. Wenz tells Mrs. Wenz that he is at Verizon “[w]iping the phone.”

And finally, West Shore believes that many of the Wenzes' responses to its written discovery requests are deficient.

II. Analysis

West Shore asks the court to enter default judgment against the Wenzes for violating the court's July 30, 2021 discovery order. The Wenzes have not responded. The court should grant West Shore's motion because they have violated a court order and all the requirements for entry of default judgment are satisfied. Given this recommendation, the court need not compel further discovery from the Wenzes.

1. Motion for Default Judgment

The Federal Rules allow the court to sanction a party who violates a discovery order. Fed. R. Civ. P. 37(b)(2). These sanctions can include entry of default against the offending party. Id. The Wenzes have violated the July 30, 2021 Order by failing to disclose the computer and email addresses. So the only question is what sanction the court should impose for their conduct.

Before entering a default judgment as a sanction, a court must consider four things. Wilson v. Volkswagen of Am., Inc., 561 F.2d 494, 503–04 (4th Cir. 1977). To begin with, it must consider whether the offending party acted in bad faith. Id. Next, the court must determine the amount of prejudice that the failure to respond caused to the party who served the discovery. Id. Then, the court must determine the need to deter similar conduct. Id. Finally, the court must evaluate whether less drastic sanctions would be effective. Id.

*3 After analyzing these factors, it is appropriate for the district court to enter a default judgment against the Wenzes.

The court first looks to whether the Wenzes' conduct amounts to bad faith. A party acts in bad faith when it shows a “callous disregard for the authority of the district court and the Rules.” Mut. Fed. Sav. & Loan Ass'n v. Richards & Assocs., Inc., 872 F.2d 88, 92 (4th Cir. 1989). A primary example of bad-faith conduct is ignoring the opposing party's discovery requests and the court's orders requiring compliance. Id. at 93; Anderson v. Found. for Advancement, Educ. & Emp. of Am. Indians, 155 F.3d 500, 504 (4th Cir. 1998) (responding party “stonewall[ing] on discovery from the inception of the lawsuit” constituted bad faith).

The Wenzes not only violated the court's discovery order at least twice but also ignored discovery requests and their obligations under the Federal Rules. Their continued disregard of court orders despite several warnings shows their indifference towards the authority of the court and this litigation. Their behavior amounts to bad faith.

The second factor focuses on whether the Wenzes noncompliance prejudiced West Shore. One type of prejudice a party can suffer from a discovery order violation is the inability to effectively prepare and litigate its case. See Mut. Fed. Sav. & Loan Ass'n, 872 F.2d at 93 (affirming district court's determination that requesting party “suffered great prejudice” because the requested documents were necessary for the party to prove its case); Porter v. Guarino, F.R.D. 282, 284 (M.D.N.C. 2004) (requesting party “suffered great prejudice” when he could not prepare his case and wasted considerable resources moving to obtain discovery material).

The Wenzes' continued evasive behavior has delayed this litigation. Their failure to abide by court orders or participate in discovery has left West Shore with no option but to repeatedly ask the court to intervene. And the withholding—and potential destruction—of evidence has interfered with West Shore's ability to litigate this case. So this factor supports entering default judgment against the Wenzes.

The Wenzes have disregarded the court's instructions not just once, but several times. This behavior impedes the administration of justice and wastes significant resources of the parties involved and the court. This type of conduct—either by the Wenzes and by others who may come before this court—must be deterred.

The court has previously sanctioned the Wenzes, but they continue to ignore its orders. Given that lesser sanctions were ineffective and that the Wenzes appear to have abandoned this case, no sanction less than entry of a default judgment would effectively address their conduct.

Along with considering the Wilson factors, the court must ensure that a party had explicit notice about the potential for a default judgment before imposing that sanction. See Hathcock v. Navistar Int'l Transp. Corp., 53 F.3d 36, 40 (4th Cir. 1995) (“[T]his court has emphasized the significance of warning a defendant about the possibility of default before entering such a harsh sanction.”).

*4 The court has warned the Wenzes repeatedly about the potential for entry of a default judgment both in person and in written orders. See D.E. 47 ¶ 10; D.E. 63. But the Wenzes have chosen not to heed these warnings.

Each factor supports entry of a default judgment against the Wenzes.

2. Motion to Compel and Attorney's Fees Award

In light of the recommendation of entry of default judgment, the remaining discovery issues raised in West Shore's motion to compel are moot. And given the recommendation of default, the court finds that granting West Shore's request for attorney's fees would be unjust. Should the district court decline to enter a default judgment against the Wenzes it should, in the alternative, grant West Shore's motion to compel and request for attorney's fees.

III. Conclusion

For the reasons stated above, the district court should grant West Shore's motion and grant a default judgment against Neil Wenz, Jacqueline Wenz, and East Coast Shower and Bath, LLC.

The Clerk of Court must serve a copy of this Memorandum and Recommendation (“M&R”) on each party who has appeared in this action. Any party may file a written objection to the M&R within 14 days from the date the Clerk serves it on them. The objection must specifically note the portion of the M&R that the party objects to and the reasons for their objection. Any other party may respond to the objection within 14 days from the date the objecting party serves it on them. The district judge will review the objection and make their own determination about the matter that is the subject of the objection. If a party does not file a timely written objection, the party will have forfeited their ability to have the M&R (or a later decision based on the M&R) reviewed by the Court of Appeals.

Interrogatory #2 asked them to “[i]dentify all email accounts ... used to conduct ECSB business at any time between September 4, 2020 and the present.” ECSB's Resp. to Pl.'s Interrog. No. 2, D.E. 65-7 at 3.