*1 THIS CAUSE is before the Court upon Third-Party Plaintiffs’ Motion to Preclude Happy Tax Holdings Corp. from Using Any Information or Witness to Supply Evidence and for Other Relief (ECF No. 231). Third-Party Defendant Happy Tax Holdings Corp. (“HT Corp.”) filed a response (ECF No. 237), to which Third-Party Plaintiffs filed a reply (ECF No. 247).[1] The matter was referred to the undersigned by the Honorable Federico A. Moreno, United States District Judge, pursuant to 28 U.S.C. § 636 and the Magistrate Judge Rules of the Local Rules of the Southern District of Florida, to take all necessary and proper action as required by law with respect to any and all pretrial matters (ECF No. 15). The undersigned held a hearing on the Motion on October 12, 2022, where the Court heard testimony from pro se Plaintiff/Counter-Defendant Mario Costanz, as corporate representative of HT Corp. (ECF No. 272). Upon consideration of the Motion, Response, Reply, the record as a whole, and being otherwise duly advised in the premises, and with the benefit of the testimony and positions advanced at the October 12, 2022 hearing, the undersigned respectfully RECOMMENDS that the Motion (ECF No. 231) be GRANTED as further set forth below.

I. BACKGROUND

This action began as a suit for breach of a promissory note, breach of guaranty, breach of a franchise agreement, defamation, and tortious interference with advantageous business contracts and relationships, brought by an income tax preparation service franchisor against former and current franchisees. Plaintiffs—the franchisors—initiated this action in the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida, on October 4, 2019. Defendants removed the action to this Court on November 1, 2019, invoking the Court's diversity jurisdiction pursuant to 28 U.S.C. § 1332. After motion practice and a series of amendments, Plaintiffs filed the operative Third Amended Complaint (ECF No. 81), on December 15, 2020.

On September 17, 2021, Defendants answered the Third Amended Complaint (ECF No. 125). Concurrently, they also filed their nine-count Counterclaims and Third-Party Complaint (id. at 16), identifying Theodore Muftic and HT Corp. as Third-Party Defendants. The Court assumes familiarity with the allegations set forth in the Counterclaims and Third-Party Complaint, which do not bear summarizing here.

HT Corp. was served with process on October 4, 2021. (ECF No. 143 at 3). On October 14, 2021, HT Corp., Plaintiff/Counter-Defendant Happy Tax Franchising LLC (“HT Franchising”), and pro se Plaintiff/Counter-Defendant Mario Costanz moved for an extension of time to respond to the Counterclaims and Third-Party Complaint. (ECF No. 150). The Court granted the motion, extending the deadline to respond to November 15, 2021. (ECF No. 154). The Court's Paperless Order granting the motion stated that “[n]o further extensions of time to respond will be entertained.” (Id.). On November 16, 2021, HT Corp., HT Franchising, and Mr. Costanz filed a joint motion to dismiss only Count IX of the Counterclaims and Third-Party Complaint for failure to state a claim. (ECF No. 162). The motion was granted on May 24, 2022. (ECF Nos. 197, 205). Third Party Defendants, including HT Corp, thereafter filed their answer to the Counterclaims and Third-Party Complaint, asserting various affirmative defenses.

*2 On June 15, 2022, the district court entered an order reopening discovery until August 8, 2022 (ECF No. 207). Trial is presently set to begin during the two-week trial period commencing March 13, 2023; the calendar call is scheduled for March 7, 2022. (ECF No. 276). Discovery remains closed. (Id.).

Now, pursuant to Federal Rule of Civil Procedure 37(c) and 37(d), Third-Party Plaintiffs request that the Court preclude HT Corp. from using any information or witness to supply evidence on a motion, at a hearing, or at trial; prohibit HT Corp. from opposing the claims directed against it in the Third-Party Complaint and from introducing evidence at trial; and award Third-Party Plaintiffs their reasonable expenses, including attorneys’ fees, against HT Corp., its counsel, or both.

II. DISCUSSION

Third-Party Plaintiffs assert that HT Corp. has not complied with its initial disclosure obligations, served answers to discovery requests, appeared for a duly noticed Rule 30(b)(6) deposition, or filed a responsive pleading answering the Third-Party Complaint. Specifically, Third-Party Plaintiffs assert that HT Corp.’s Rule 26 initial disclosures were due on or before November 3, 2021, 30 days after HT Corp. was served with process on October 4, 2021, pursuant to Rule 26(a)(1)(D), but HT Corp. has not made those disclosures to date. They assert that HT Corp. has failed to serve answers to, object to, or move for relief from responding to requests for production that were propounded on June 28, 2022, during the then-reopened discovery period. Third-Party Plaintiffs also assert that HT Corp. failed to appear at, object to, or move to be excused from attending a duly noticed Rule 30(b)(6) deposition. According to Third-Party Plaintiffs, HT Corp.’s counsel informed them, on August 2, 2022, that it would not be complying with the foregoing requests and obligations. Third-Party Plaintiffs argue that they have no notice of any issue HT Corp. may raise at trial and thus, they would suffer undue prejudice unless HT Corp. is precluded from, essentially, defending the suit.

In response, HT Corp. asserts that the failures described above were due to excusable neglect and inadvertence. HT Corp. first asserts that it joined in a November 15, 2021 motion to dismiss Count IX of the Counterclaims and Third-Party Complaint, which was granted on May 24, 2022, and that it filed an answer (ECF No. 208) to the Third-Party Complaint on June 21, 2022. Next, HT Corp. contends that, while its failure to make initial disclosures was due to inadvertence and excusable neglect, there was no duty to make initial disclosures before the instant Motion[2] was filed because there was no duty to confer. Instead, HT Corp. argues that related parties that do not operate apart from HT Corp.—Plaintiffs/Counter-Defendants Mario Costanz (who is proceeding pro se) and HT Franchising—made disclosures, and HT Corp.’s evidence will otherwise be the same as the evidence for those parties. Although, counsel for HT Corp. note in the Response that they rely on Mr. Costanz to produce requested documents. Last, HT Corp. avers that it filed a Notice of Joinder to those parties’ initial and supplemental disclosures on September 4, 2022.

*3 In their Reply, Third-Party Plaintiffs largely reiterate the arguments advanced in their Motion and point out purported inaccuracies in HT Corp.’s Response based on the record in this case. Otherwise, Third-Party Plaintiffs note that HT Corp. did not properly join in the motion to dismiss Count IX, as that claim was not asserted against HT Corp.; thus, Third-Party Plaintiffs argue that HT Corp. did not answer the Third-Party Complaint on or before November 15, 2021. Third-Party Plaintiffs also note that the “joint supplemental initial disclosures” referenced in the Response do not apply to the third-party claims asserted against HT Corp. Rather, Third-Party Plaintiffs explain that the disclosures to which HT Corp. purportedly joined are identical in all respects to the initial disclosures Plaintiffs served before the Third-Party Complaint was filed and brought claims against HT Corp. As such, the disclosures therein relate solely to the information and witnesses arising from Plaintiffs Costanz and HT Franchising's claims, but add nothing at all by way of disclosing information or witnesses on which they intend to rely in defending against the Third-Party claims. Third-Party Plaintiffs emphasize that HT Corp. refused to make initial disclosures, as opposed to inadvertently neglecting to make them, and argue that HT Corp. has not been diligent.

At the hearing on the Motion on October 12, 2022, the Court heard testimony from Mr. Costanz, who is also the sole corporate representative for both HT Corp. and HT Franchising. When asked to describe discovery efforts for those entities, Mr. Costanz testified that he had hired an e-discovery service to assist in the production of requested discovery.[3] Mr. Costanz also reiterated the argument advanced in the written response that HT Corp. had served initial disclosures by joining in HT Franchising's initial disclosures, though it is without dispute that HT Corp. made no initial disclosures unique to that Third-Party Defendant or the claims raised against it. As to HT Corp.’s purported failure to appear through a corporate representative at the August 2, 2022 deposition, Mr. Costanz testified that, following his own deposition in his personal capacity in connection with this case, he developed chest pains and went to the hospital; he was released later that same day. Mr. Costanz's testimony confirmed that he knew the depositions of both corporate defendants was noticed and that he was expected to appear on their behalf, but he did not appear for the deposition of HT Corp. or HT Franchising the next day. He did not authorize counsel to reschedule the depositions with opposing counsel.

As set forth below, the Court finds that HT Corp. failed to make initial disclosures, failed to respond to Mr. Hill's discovery request, and failed to sit for a duly noticed deposition. Because the Court finds that these failures were not substantially justified, the Court recommends that sanctions be imposed.

A. Initial Disclosures

First, the Court finds that HT Corp. failed to make initial disclosures and, thus, sanctions are required. Federal Rule of Civil Procedure 26(a) requires a party, “without awaiting a discovery request,” to make certain disclosures to the other parties in the action. These disclosures include the name and contact information for individuals likely to have discoverable information that the disclosing party may use to support its claims or defenses; copies, or descriptions by category or location, of documents, electronically stored information, and tangible things in the disclosing party's possession the disclosing party may use to support a claim or defense; a computation of damages claimed; and any insurance agreement under which an insurance company may be liable to satisfy the judgment or indemnify the disclosing party. Fed. R. Civ. P. 26(a)(A)(i)–(iii). Generally, a party first joined in an action after the Rule 26(f) scheduling conference “must make initial disclosures within 30 days after being served or joined[.]” Fed. R. Civ. P. 26(a)(1)(D). “Rule 26(a)’s purposes are to allow for adequate case preparation and foreclose unfair surprises ... The initial disclosure requirement should be applied with common sense keeping in mind the salutary purposes that the rule is intended to accomplish.” Sec. & Exch. Comm'n v. Montano, No. 618CV1606ORL31GJK, 2019 WL 2254946, at *2 (M.D. Fla. Mar. 5, 2019) (citations omitted).

*4 Where, as here, “a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless.” Fed. R. Civ. P. 37(c)(1). However, Rule 37(c) also provides that a court may, “[i]n addition to or instead of” the foregoing sanctions, “order payment of the reasonable expenses, including attorney's fees, caused by the failure,” “inform the jury of the party's failure,” and “impose other appropriate sanctions[.]” Fed. R. Civ. P. 37(c)(1)(A)–(C).

“An individual's discovery conduct should be found ‘substantially justified’ under Rule 37 if it is a response to a ‘genuine dispute, or if reasonable people could differ as to the appropriateness of the contested action.’ ” Pitts v. HP Pelzer Auto. Sys., Inc., 331 F.R.D. 688, 692 (S.D. Ga. 2019) (quoting In re Delta/AirTran Baggage Fee Antitrust Litig., 846 F. Supp. 2d 1335, 1358 (N.D. Ga. Feb. 3, 2012)). “A failure to timely make the required disclosures is harmless when there is no prejudice to the party entitled to receive the disclosure.” Hewitt v. Liberty Mut. Grp., Inc., 268 F.R.D. 681, 683 (M.D. Fla. 2010). The nondisclosing party bears “[t]he burden of establishing that a failure to disclose was substantially justified or harmless.” Mitchell v. Ford Motor Co., 318 F. App'x 821, 824 (11th Cir. 2009).

To begin, the Court finds that HT Corp. failed to comply with its initial disclosure obligation. HT Corp. was obligated to make initial disclosures under Rule 26(a) within 30 days of being served with process. See Fed. R. Civ. P. 26(a)(1)(D). Because HT Corp. was served with process on October 4, 2021, (ECF No. 143 at 3), its initial disclosures were due on or before November 3, 2021. HT Corp. was indeed required to make initial disclosures, or at the very least move for an extension of time to do so, by November 3, 2021. Instead, HT Corp. avers in its Response that it joined in HT Franchising's and Mr. Costanz's supplemental initial disclosures on September 4, 2022, 10 months after it was served with process.[4] To the extent HT Corp. asserts it joined in those parties’ initial disclosures, the Response points the Court to no Federal Rule of Civil Procedure or other authority that permits a party to adopt another party's initial disclosures after they are made. Nor could counsel for HT Corp., at oral argument, point the Court to any Federal Rule of Civil Procedure or other federal authority that permits a party to adopt another party's already-made initial disclosures; the Court is, likewise, unaware of any Rule or authority to that effect.

In any event, even assuming HT Corp. could adopt its co-parties’ initial disclosures, review of the September 4, 2022 supplemental initial disclosures that HT Corp. purportedly joined in revealed that the disclosures in question did not actually make any disclosures on behalf of HT Corp. Rather, the initial disclosures made on behalf of HT Franchising and Mr. Costanz were affirmative disclosures that relate to their claims brought as Plaintiffs in this action. The September 4, 2022 supplemental initial disclosures reviewed at the October 12, 2022 hearing contained no substantive differences between HT Franchising and Mr. Costanz's initial disclosures and their September 4, 2022 supplemental initial disclosures, despite being named as Counterclaim-Defendants in the intervening time. But unlike HT Franchising and Mr. Costanz, HT Corp. is not a plaintiff in this action; HT Corp. is a Third-Party Defendant. Thus, it is not explained how HT Franchising and Mr. Costanz's initial disclosures and supplemental initial disclosures, which relate to their affirmative claims brought as Plaintiffs and which disclose the information they will use to support their claims, fairly disclose how HT Corp. will defend against the claims asserted against it where HT Corp. was joined in this action as a Third-Party Defendant.

*5 For these reasons, the Court finds that HT Corp. failed to timely make initial disclosures.

Next, the Court finds that the failure to make initial disclosures was not substantially justified or harmless. The Response does not directly argue that the failure is substantially justified or harmless, beyond arguing that the failure was inadvertent and due to excusable neglect. But as noted above, HT Corp., through counsel, was not able to point the Court to any Federal Rule of Civil Procedure or other federal authority that permits a party to adopt another party's initial disclosures. And the law in the Eleventh Circuit is clear “that attorney error based on a misunderstanding of the law [is] an insufficient basis for excusing a failure to comply with a deadline.” Advanced Estimating Sys., Inc. v. Riney, 130 F.3d 996, 998 (11th Cir. 1997) (citing Cavaliere v. Allstate Ins. Co., 996 F.2d 1111, 1115 (11th Cir. 1993)). In any event, HT Corp.’s purported joinder or adoption of HT Franchising and Mr. Costanz's supplemental initial disclosures had no meaning where the disclosures at issue substantively related to their affirmative claims as plaintiffs in this action and not to their defenses as counter-defendants. Thus, the Court finds that reasonable persons would not agree that HT Corp. disclosed any information that it would use in support of its defenses against the Third-Party Complaint when it joined or adopted HT Franchising and Mr. Costanz's affirmative disclosures as they relate to the claims asserted in a different pleading: the Third Amended Complaint.

Accordingly, the undersigned recommends that the district court preclude HT Corp. from using any information or witnesses to supply evidence on a motion, at a hearing, or at trial. See Fed. R. Civ. P. 37(c)(1).

B. Request for Production and Corporate Representative Deposition

Second, the Court finds that HT Corp. failed to respond to the discovery request identified in the Motion and sit for a duly noticed deposition and, thus, sanctions are warranted.

Under Rule 37(d), courts must order sanctions where, as here, a party fails to appear for a duly noticed deposition or serve answers, objections, or responses to interrogatories or requests for inspection. Fed. R. Civ. P. 37(d)(1)(A). Under Rule 37(d)(3), sanctions may include any of the sanctions listed in Rule 37(b)(2)(A)(i)–(vi), which are: “(i) directing that the matters embraced in [a disobeyed discovery] order or other designated facts be taken as established for purposes of the action, as the prevailing party claims; (ii) prohibiting the disobedient party from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence; (iii) striking pleadings in whole or in part; (iv) staying further proceedings until the order is obeyed; (v) dismissing the action or proceeding in whole or in part; (vi) rendering a default judgment against the disobedient party[.]” Fed. R. Civ. P. 37(b)(2)(A)(i)–(vi). Courts, instead of or in addition to the foregoing sanctions, “must require the party failing to act, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust.” Fed. R. Civ. P. 37(d)(3). “No showing of willfulness or bad faith or fault is required.” Inspirations Nevada LLC v. Med Pro Billing, Inc., No. 20-CV-60268, 2020 WL 6581602, at *1 (S.D. Fla. Nov. 10, 2020) (quoting Joe Hand Promotions, Inc. v. Bowers, No. 1:18-CV-3859-MHC, 2020 WL 4557072, at *2 (N.D. Ga. Feb. 25, 2020)).

*6 To begin, the Court finds that HT Corp. failed to serve responses to Jamey Hill's request for production and failed to appear through a corporate representative at its duly noticed Rule 30(b)(6) deposition. There is no dispute that HT Corp. failed to respond to Mr. Hill's First Request for Production of Documents. Mr. Hill's request for production was served on June 28, 2022. The Response, which was filed on September 8, 2022, does not dispute that HT Corp. did not respond to Mr. Hill's request for production within 30 days, see Fed. R. Civ. P. 34(b)(2), and instead concedes that HT Corp. and other Counterclaim-Defendants and Third-Party Defendants were, at that point in time, still in the process of compiling materials for production, generally, see (ECF No. 237 at 4).

Nor is there any dispute that HT Corp. failed to appear for a duly noticed deposition. See (ECF No. 231 at 39) (certifying that a corporate representative did not appear on HT Corp.’s behalf at its August 2, 2022 deposition). Indeed, testimony developed at the October 12, 2022 hearing established that Mr. Costanz, who is both a pro se Plaintiff/Counter-Defendant and the only corporate representative for both HT Corp. and HT Franchising, simply did not show up at HT Corp.’s duly noticed August 2, 2022 deposition. While Mr. Costanz testified that he was in the hospital the day before HT Corp.’s deposition due to chest pains following his personal-capacity deposition in connection with this case, he was released the same day. HT Corp. did not move for a protective order or contact opposing counsel to attempt to reschedule the deposition. Instead, counsel for HT Corp., Amber Robinson, Esq., who has already been sanctioned in this case, see (ECF No. 280), attempted to fault opposing counsel for his failure to propose dates to reschedule the deposition, before acknowledging that her client representative would not authorize her to agree to another deposition date.

Accordingly, the Court finds there is no dispute that HT Corp. failed to timely serve responses to the discovery request at issue or sit for a duly noticed deposition.

Next, the Court finds that the failure to timely serve responses to Mr. Hill's request for production or sit for a duly noticed Rule 30(b)(6) deposition was not substantially justified and, thus, sanctions are required. The Response does not directly argue that these failures were substantially justified, and instead, as noted above, argues that the failures were due to excusable neglect and inadvertence. However, review of the record reveals that HT Corp. did not move this Court for a protective order or to be excused from sitting for its Rule 30(b)(6) deposition in light of Mr. Costanz's health concerns. Cf., e.g., Inspirations Nevada LLC, 2020 WL 6581602, at *2 (stating that the party “should have moved for a protective order rather than simply failing to appear at the depositions of which they had plainly adequate notice”); see also Fed. R. Civ. P. 37(d)(2) (“A failure described in Rule 37(d)(1)(A) is not excused on the ground that the discovery sought was objectionable, unless the party failing to act has a pending motion for a protective order under Rule 26(c).”); S.D. Fla. L.R. 7.1(d)(1) (setting forth the requirements for the filing of emergency motions). Nor did HT Corp.’s counsel attempt to remedy Mr. Costanz's failure to appear on its behalf at the August 2, 2022 deposition by conferring with opposing counsel to reschedule the deposition following the nonappearance. And as to the failure to timely serve responses to Mr. Hill's request for production, HT Corp. and its counsel have proffered no basis upon which the Court may find that the failure was substantially justified.

Based on the foregoing, the Court finds that reasonable minds would not agree that HT Corp.’s failure to sit for its deposition or respond to Mr. Hill's request for production were appropriate in the absence of a court order or any efforts by its counsel to remedy the failure. The Court thus concludes that the failures were not substantially justified and that sanctions are mandatory.

*7 HT Corp. has failed to comply with its discovery obligations and further failed to either justify its deficiencies or attempt to meaningfully cure them. Third-Party Plaintiffs have been denied the opportunity to take discovery from HT Corp. and the time to do so has passed. While no evidence has to date been proffered or identified by HT Corp. or its counsel to substantiate its defense against the claims, it cannot be permitted to do so later, having failed to adduce such proof during the discovery period. To that end, the undersigned recommends that HT Corp. be prohibited from opposing the claims directed against it in the Third-Party Complaint and from introducing any matters into evidence. See Fed. R. Civ. P. 37(b)(2)(A)(ii). The undersigned further recommends that Third-Party Plaintiffs be awarded their reasonable fees and expenses incurred in bringing this Motion. See Fed. R. Civ. P. 37(d)(3).

III. RECOMMENDATIONS

For the foregoing reasons, the undersigned respectfully RECOMMENDS that Third Party Plaintiffs’ Motion to Preclude Happy Tax Holdings Corp. from Using Any Information or Witness to Supply Evidence and for Other Relief (ECF No. 231) be GRANTED.

The undersigned FURTHER RECOMMENDS that (i) Happy Tax Holdings Corp. be precluded from using any information or witness to supply evidence on a motion, at a hearing, or at trial; (ii) that Happy Tax Holdings Corp. be prohibited from opposing the claims directed against it in the Third-Party Complaint and from introducing any matters into evidence; and (iii) that Third-Party Plaintiffs be awarded their reasonable fees and expenses incurred in bringing this Motion, to include court reporter appearance fees incurred in connection with the August 2, 2022 deposition.

A party shall serve and file written objections, if any, to this Report and Recommendation with the Honorable Federico A. Moreno, United States District Judge for the Southern District of Florida, within FOURTEEN (14) DAYS of being served with a copy of this Report and Recommendation. Failure to timely file objections will bar a de novo determination by the District Judge of anything in this recommendation and shall constitute a waiver of a party's “right to challenge on appeal the district court's order based on unobjected-to factual and legal conclusions.” 11th Cir. R. 3-1 (2016); 28 U.S.C. § 636(b)(1)(C); see also Harrigan v. Metro-Dade Police Dep't Station #4, 977 F.3d 1185, 1191–92 (11th Cir. 2020).

RESPECTFULLY SUBMITTED in Chambers at Miami, Florida, this 1st day of November, 2022.

The Response and Reply are both untimely under the Local Rules, though they were filed within mere hours of the respective 11:59 P.M. deadlines. The Court will sua sponte accept the Response and Reply as timely filed.

HT Corp.’s Response does not clearly identify which motion it refers to, but it appears to reference the instant Motion.

Mr. Costanz represented that he was, at the time of the hearing, prepared to produce over 36,000 documents.

To the extent the Response states that HT Corp. filed a notice of joinder to this effect, the Court is unable to locate any such filing on the docket.