WBDH-BC Holdings, Ltd. v. Varsatel Corp.
WBDH-BC Holdings, Ltd. v. Varsatel Corp.
2022 WL 18776103 (S.D. Fla. 2022)
November 3, 2022
Becerra, Jacqueline, United States Magistrate Judge
Summary
The Court found the Defendants in contempt of court for failing to respond to discovery requests and comply with multiple Court orders, and imposed sanctions pursuant to Federal Rule of Civil Procedure Rule 37. This included a request for production of Defendant Varsatel Corporation and Defendant Comtel Direct LLC's Quickbooks accounting files, which the Defendants failed to produce. The Court's sanctions are intended to remedy this violation and ensure that the Defendants comply with the Court's orders.
WBDH-BC HOLDINGS LTD., an Ontario Corporation, Plaintiff,
v.
VARSATEL CORPORATION, a Florida corporation, COMTEL DIRECT, LLC, a Florida Limited Liability Company, HARRISON VARGAS, an individual, GINNA PAULSEN an individual, LOUIS ARRIOLA, an individual, THE MAPLE WOOD ISLE ASSOCIATION, INC., a Florida not-for-profit corporation, and CHT HOLDINGS, LLC, a Delaware Limited Liability Company, FRANQUICIAS CALLNET, LLC, a Florida Limited Liability company, CHT HOLDINGS DOMINICANA, SAS, a Dominican Republic Corporation, Defendants
v.
VARSATEL CORPORATION, a Florida corporation, COMTEL DIRECT, LLC, a Florida Limited Liability Company, HARRISON VARGAS, an individual, GINNA PAULSEN an individual, LOUIS ARRIOLA, an individual, THE MAPLE WOOD ISLE ASSOCIATION, INC., a Florida not-for-profit corporation, and CHT HOLDINGS, LLC, a Delaware Limited Liability Company, FRANQUICIAS CALLNET, LLC, a Florida Limited Liability company, CHT HOLDINGS DOMINICANA, SAS, a Dominican Republic Corporation, Defendants
Case No. 0:21-cv-61463-JEM/BECERRA
United States District Court, S.D. Florida
Entered on FLSD Docket November 03, 2022
Becerra, Jacqueline, United States Magistrate Judge
ORDER FINDING DEFENDANTS IN CONTEMPT OF COURT AND IMPOSING SANCTIONS
*1 THIS CAUSE is before the Court on WBDH-BC Holdings, Ltd.’s (“Plaintiff”) Motion for Sanctions, filed as a Notice of Filing Proposed Order, ECF No. [223]. The undersigned held a hearing on November 2, 2022. On June 28, 2022, August 22, 2022, and September 20, 2022, the Court held three prior discovery hearings where Plaintiff sought to compel Defendants, Harrison Vargas, Comtel Direct, LLC and Varsatel Corporation (collectively, the “Defendants”), to respond to the following discovery requests:
(the “Discovery Requests”). At the prior hearings, the Court granted Plaintiff's Motion to Compel. ECF Nos. [183], [198] and [213]. The Court ordered Defendants to provide responses to Plaintiff's Discovery Requests no later than Friday, August 5, 2022. ECF No. [183]. Additionally, the Court ordered Defendants to pay to Plaintiff attorneys’ fees and costs in the amount of $12,156.77. ECF No. [213]. As of November 2, 2022, the date of the present hearing, Defendants have failed to respond to any of Plaintiff's Discovery Requests, failed to produce to Plaintiff a single document responsive to its requests for production, and failed to answer a single interrogatory. Additionally, Defendants have failed to pay to Plaintiff the $12,156.77 in attorneys’ fees and costs previously ordered.
“Federal courts, including bankruptcy courts, possess inherent authority to impose sanctions against attorneys and their clients.” In re Evergreen Sec., Ltd., 570 F.3d 1257, 1263 (11th Cir. 2009) (citing In re Walker, 532 F.3d 1304, 1309 (11th Cir. 2008)). Federal courts have the authority to “sua sponte, tak[e] any action or mak[e] any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process.” Id.
Federal Rule of Civil Procedure Rule 37 governs a party's failures to make disclosures or participate in discovery, and the imposition of sanctions related to discovery violations. Specifically, Rule 37(b) provides courts with the authority to impose sanctions for a party's failure to comply with a court order to permit or provide discovery. Fed. R. Civ. P. 37(b)(2)(A). Rule 37(b)(2)(A) authorizes the following sanctions orders:
i. directing that the matters embraced in the 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; or
*2 vii. treating as contempt of court the failure to obey any order except an order to submit to a physical or mental examination.
Id. See also Marine Depot, Int'l, Inc. v. James River Grp., Inc., No. 19-CV-24821, 2020 WL 7864100, at *2 (S.D. Fla. Dec. 30, 2020).
The Court finds that Defendants have failed to respond to discovery and comply with multiple Court orders under Fed. R. Civ. P. 37(b) and (d), that these failures are not substantially justified under Fed. R. Civ. P. 37, and that the imposition of sanctions is warranted.
It is therefore ORDERED AND ADJUDGED as follows:
1. Defendants are in contempt of court for failing to comply with multiple Court orders. See ECF Nos. [183], [198] and [213].
2. The Discovery Requests, if properly responded to, would have enabled Plaintiff to establish the Claims to Set Aside Fraudulent Transfers as alleged in Counts 8 through 10 of Plaintiff's Amended Complaint. ECF No. [77]. The Discovery Requests included a request for production of Defendant Varsatel Corporation and Defendant Comtel Direct LLC's Quickbooks accounting files. Plaintiff asserts that the Quickbooks files, if produced, would evidence the following:
(a) Between December 5, 2018 and December 31, 2020, Varsatel and/or Comtel made not less than $1,735,309.73 in transfers to or for the benefit of Vargas. A spreadsheet itemizing these transfers is attached to the Amended Complaint as Exhibit 10.
(b) Between December 5, 2018 and December 31, 2020, Varsatel, Comtel and/or CHT made not less than $245,482.63 in transfers to or for the benefit of Paulsen. A spreadsheet itemizing these transfers is attached to the Amended Complaint as Exhibit 11.
(c) Between December 5, 2018 and September 21, 2020, Varsatel and/or Comtel made not less than $1,218,245.37 in transfers to CHT. A spreadsheet itemizing these transfers is attached to the Amended Complaint as Exhibit 12.
(d) Between December 5, 2018 and December 31, 2020, Varsatel and/or Comtel made not less than $338.000.00 in transfers to or for the benefit of Franquicias. A spreadsheet itemizing these transfers is attached to the Amended Complaint as Exhibit 13.
(e) Between December 5, 2018 and December 31, 2020, Varsatel, Comtel and/or CHT made not less than $208,350.00 in transfers to or for the benefit of CHT Dominicana. A spreadsheet itemizing these transfers is attached to the Amended Complaint as Exhibit 14.
(f) On or about November 2, 2018, Comtel wired $800,000.00 to an individual named Maria Luisa Viloria. This wire was used as a down payment for property in the Dominican Republic, where a data center is located, and which is owned by CHT, CHT Dominicana or an affiliate thereof. The wire was made for the benefit of Vargas, CHT and CHT Dominicana.
(g) The transfers described in paragraphs (a) through (f) hereinabove shall be referred to as the “Transfers.”
(h) By making the Transfers, Varsatel and Comtel transferred assets to or for the benefit of Vargas, Paulsen, CHT, Franquicias and CHT Dominicana.
(i) Neither Comtel, nor Varsatel, nor Vargas, received consideration for the Transfers.
(j) The sum of Comtel's debts is greater than the sum of its assets at a fair valuation.
*3 (k) The sum of Varsatel's debts is greater than the sum of its assets at a fair valuation.
(l) The sum of Vargas's debts is greater than the sum of his assets at a fair valuation.
(m) Comtel, Varsatel and Vargas are not generally paying their debts as they become due.
(n) Comtel, Varsatel and Vargas are each “insolvent” within the meaning of Fla. Stat. § 726.103.
(o) Neither Varsatel nor Comtel had any legal obligation to make the Transfers.
(p) Varsatel and Comtel concealed from creditors that the companies made the Transfers.
(q) Had Varsatel and Comtel not made the Transfers, the funds comprising the Transfers would have been retained as property of Varsatel and Comtel and would have been available for distribution to Varsatel and Comtel's creditors.
(r) At the time of the Transfers and at all material times thereafter, Varsatel's and Comtel's remaining assets were unreasonably small in relation to the business these companies were conducting.
(s) Through the Transfers, Varsatel and Comtel transferred property.
(t) Vargas, Paulsen, CHT, Franquicias and CHT Dominicana were the initial transferees and/or subsequent transferees of the Transfers, or were the persons for whose benefit the Transfers were made.
(u) Varsatel and/or Comtel received less than a reasonable equivalent in exchange for the Transfers.
(v) At the time of the Transfers, Varsatel and/or Comtel (i) were engaged or were about to engage in a business or a transaction for which these companies’ remaining assets were unreasonably small in relation to the business or transaction; or (ii) intended to incur, or believed or reasonably believed that they would incur, debts beyond these companies’ ability to pay as they became due.
(w) At the time of the Transfers, Varsatel and/or Comtel were insolvent, or became insolvent as a result of such Transfers.
3. Pursuant to Fed. R. Civ. P. 37(b)(2)(A)(i), the Court directs that the facts set forth in paragraphs 2(a) through 2(w) of this Order are taken as established for purposes of the action, as Plaintiff claims.
4. Moreover, pursuant to Fed. R. Civ. P. 37(b)(2)(A)(ii), Varsatel, Comtel, and Vargas shall be prohibited from opposing any of the facts set forth in paragraphs 2(a) through 2(w) of this Order.
5. Plaintiff is awarded an additional $3,300.00 in attorneys’ fees and costs for Plaintiff's counsel's preparation for and appearance at the November 2, 2022 hearing. Accordingly, Defendants, Harrison Vargas, Comtel Direct, LLC and Varsatel Corporation are ordered to pay to Plaintiff's counsel, $15,456.77 no later than seven (7) days following the date of this Order. If this amount is not timely paid to Plaintiff, the Court will enter a default judgment against Defendants, Harrison Vargas, Comtel Direct, LLC and Varsatel Corporation on all counts of Plaintiff's Amended Complaint.[1]
*4 DONE AND ORDERED in Miami, Florida, on November 3, 2022.
Footnotes
Plaintiff raised two issues concerning the Unopposed Motion to Withdraw, ECF No. [224]. Although the Unopposed Motion to Withdraw is not before the undersigned, it is noted that Plaintiff's counsel represented that the address of Defendant that is listed in the motion does not appear to be valid, as Plaintiff has received multiple items of mail with this address that were returned to sender. Second, Plaintiff alerted the Court to another case in this District where CHT Holdings, LLC is the plaintiff and where likewise there have been multiple motions to withdraw as attorney. See Paperless Order, CHT Holdings, LLC v. Telefonica International Wholesale Services America, S.A. et al, No. 1:20-cv-23363-MGC (S.D. Fla. July 5, 2022), ECF No. [145].